Paying People!!

[bitsnstuff]

Could someone in the know please tell how this would work:-

If I were to get people to as a an agent/rep for my company (not Bitsnstuff) whereby they would earn 50% of the income generated from each member they got to sign up, would they be classed as an employee of my business, in which case I would have to pay their tax, NI, etc. or would they be classed as self employed and be responsible themselves. How would it work?

Kate

[multilingual]

Not entirely sure how it works but...

I think you would have to get them to sign a declaration of some sort acknowledging that they are acting on a self employed basis and any money they earn from you is to be declared by them to the inland revenue.

JB

[dcaccounting]

If all they are earning from you is "referral fees" then you couldn't want to be paying they an hourly rate would you?

You should get a self employed contact drawn up whereby you pay them a "gross figure" then the responsibility for tax and national insurance is on that of the individual, not yourself.

Regards

Dean

[bitsnstuff]

Hi,

No they definitely wouldn't be getting an hourly rate, just 50% of the membership fee for the first month of the member's subscription. They would only earn if they signed members up and also there would be no min or max.

So as I understand it ..... when getting their contract signed as a agent/rep, it would have to state that their 50% of the membership fee is gross and that they would be wholly responsible for tax and ni contributions on a self employed basis.

Kate

[Alpha]

It is a bit more problematical than that.

In the eyes of the revenue they would examine what the true relationship between the rep/agent and your company is.

They must take all the risk of their employment, provide all their own equipment, decide when and how they work, be responsible for all their own costs and be paid on a invoiced basis. They will also be responsible for filling in their own tax returns and declaring the income to HMRC for tax and NI purposes.
Preferably they will work for more than just yourself.

Most if not all of this you appear to have covered.

If they operate as a sole trader and they do not pay over their share of tax and NI the revenue can still expect you to pay it!! (This is why accountants, It contractors etc are required by agencies to operate via a limited company)

[MarkPearson]

If the agents or whatever they are called are told they earn commission per signup to a website is there no easier way to 'pay' them as there could be hundreds of agents?

Would a 'prize' be a way around this?

So they are rewarded a prize be it cash or vouchers, just an idea?

I am sure someone with more knowledge in the area than me could tell you if this would work.

[dcaccounting]

No, you couldn't do it by way of a prize... what your saying is basically a bonus... bonuses are all taxable im affraid :(

Each rep/agent would need to have a contact setting out the relationship between them and they must produce an invoice for payment.

Regards

Dean

[Riggadoo]

Here is the Inland Revenue document they would use to determine whether your people are employed by you or not.

http://www.hmrc.gov.uk/pdfs/ir56.pdf

There is a table (the contents of which have been mostly covered by Alpha) you can use to work it all out. Its never a black and white issue, but you want to be able to answer most of the questions in the self employed section for your agents.

You need to be Very careful as if the IR disagree with your classification they can sting you upto 6 years worth of PAYE and NI and its you who would have to pay the lot.

I use the services of agents and also outworkers who make the products I sell, and what I do is write to the IR every year showing processes and practices of the relationship between my company and these external "suppliers". (What they are responsible for and what I am etc) Then every year, they reply telling me that "to date" they are happy with the way I am doing things and they agree that these people are not employed by my business. This way i am covered if they all of a sudden check my companies practices.

The IR business support people are very useful and can even come out to your business to advise if your doing things right, but are independant from the real IR inspectors. Therefore you can get an initial check done from these guys before you go to the real IR.