Hiring cash in hand workers legally

[LeasingEval]

Our small business has a requirement to hire 2 general labourers during the spring/summer for 6 hours per week each - split over 2 days. We would be looking to pay £10 per hour - which would need to include tax and NI if required.

What is the best legal way to do this?

 

[BRIDGREGORY]

As far as I am aware there are no " cash in hand workers" anyone employing someone has legal obligations and a responsibility to ensure that Tax and Ni are correctly accounted for and notified.

That's not to say that there aren't thousands or hundreds of thousands of cash in hand workers but as this implies that you simply hand over £ 10.00 for every hour worked and that's it well it aint legitimate.

 

[LeasingEval]

Thanks for replying.
When I say 'cash in hand' I am referring strictly to the mechanism of transferring payment and not the euphemism for dodging tax and NI.

I guess this must still be possible since I didn't have to make a BACS payment to my newsagent for my copy of the Sun and a Mars-bar this morning

 

[Ashley_Price]

About 20 years ago I worked for a firm that got me to sign an agreement that it was my responsibility to sort out my own tax and NI.

Since starting my own business I found out that you cannot legally do this and apparently it wasn't even legal then.

As @BRIDGREGORY says, you have to probably set up a PAYE, etc., unless you can show they are self employed.

 

[Ashley_Price]

When I say 'cash in hand' I am referring strictly to the mechanism of transferring payment and not the euphemism for dodging tax and NI.

Ah, I see. I guess that is possible, but you'd still need to have full records and give them a payslip etc. What does your accountant say?

I guess this must still be possible since I didn't have to make a BACS payment to my newsagent for my copy of the Sun and a Mars-bar this morning

Why, do you employ your newsagent?

 

[LeasingEval]

Hmm - interesting.
So, how do we make the distinction between me paying £10 to the guy who cleans my windows once a month and paying £10 to the guy who lifts some heavy stuff into my van for me?

 

[LeasingEval]

Ah, I see. I guess that is possible, but you'd still need to have full records and give them a payslip etc. What does your accountant say?

I haven't consulted that on that yet - we are still at the planning stage and I am trying to judge how difficuly a thing this is to do - e.g. do I have to pay the accountant £150 ever time I need to pay a guy £60, or is there some HMRC compliant method that allows me to fo this myself.


Why, do you employ your newsagent?

I employ their services as a purveyor of fish 'n chip wrappers and chocolate I guess!

 

[Ashley_Price]

So, how do we make the distinction between me paying £10 to the guy who cleans my windows once a month and paying £10 to the guy who lifts some heavy stuff into my van for me?

Because the guy who cleans your windows uses his own equipment, he chooses when to arrive, and has several other customers. He also gives you an invoice.

The person lifting stuff into your van I assume will be using your equipment, on your (or your customer's) site and will be there when you tell him. You give him a payslip.

That, in short, is the difference between self-employed and employed.

 

[LeasingEval]

Thanks Ashley.
So does the concept of a self employed labourer not exist?

 

[Ashley_Price]

I employ their services as a purveyor of fish 'n chip wrappers and chocolate I guess!

No, because you're on his premises, buying his stock and when HE is open. You can't tell him when to open or close the shop, what stock to buy, etc.

 

[Ashley_Price]

So does the concept of a self employed labourer not exist?

Well, they would need to be able to show they were self employed. They would need to have other "customers" (i.e. people paying them to be a labourer) and while you could "agree" with them a time you wanted them to be there, they have some say over it. They would then need to give you an invoice - and probably show that they are registered with HMRC as a "self-employed" labourer.

Of course there's also CIS, which you might need to check.

I should mention I'm not an accountant or finance person, but the use of temporary help is one of many discussions I've had over the years with my accountant. He says basically, if you set the times the person works, they use your equipment and on your (or your customer's) premises then they are employed by you - unless they can show satisfactorily that they do this for others as well (like a virtual secretary for example).

 

[LeasingEval]

Good info - thanks Ashley!

 

[OfficePad]

If you set their hours or wage, then they are employed by you. You are responsible for their tax and NI.

A window cleaner sets his hours and his wage, so he can be self-employed.

 

[paulears]

The cash bit is a red herring - how you pay an employee is not the issue. HMRC treat different trade areas differently. I have a crew of six people for about ten weeks each summer. One of them invoices me and is VAT registered - I pay his invoices in full. The others get signed up for PAYE with their pay, their NI, employers NI, and holiday pay. At the end of the summer, they leave. Occasionally I need an extra person - they sign on, do one job, and at the end of the summer, they leave. Luckily, I don't have to do all that paperwork. If you choose to accept somebody as a self-employed person, and they invoice you - it is possible that at some point in the future HMRC will come to you and make you pay their NI, the missing employers NI and tax - and there's nothing you can do, and finding this person won't be possible.

 

[BRIDGREGORY]

The only other thing that I could recommend is to use agency staff.
If you do this you will only have to pay the agency invoice every month.

They will do PAYE, holiday pay etc you will just be billed by the hour..

However you will pay a much higher hourly rate than if you employed them. That's the cost of simplicity and freedom.

The other advantage is that if your business does not need them you can return them staright away. No sackings to hand out.

It just depends if your business model will stand the cost and still show a profit.

Good Luck

 

[john1989]

Regardless of employment status, pay by cheque or bank transfer.

Do you really want to put yourself in a position whereby the worker could say they never received their pay?

 

[Paul Norman]

The above advice is all sound. I am curious, however, as to why any business would want to pay their staff in cash? I have not seen a cash payment to a staff member ever in my entire working life.

 

[simon field]

The above advice is all sound. I am curious, however, as to why any business would want to pay their staff in cash? I have not seen a cash payment to a staff member ever in my entire working life.

It could be a cash business. Saves time banking.

 

[mtools]

i used to get paid in cash when i worked for Argos as a 16 year old in 2001. I worked Saturday's and would get paid a little brown envelope weekly, though I got a pay slip etc. I was under the impression that it is now compulsory that employees get paid into a bank account? or is that a myth?

 

[john1989]

Myth.

 

[talkinpeace]

I have clients who pay me in cash :
I send them an invoice.
they are retailers so receive lots of cash
they use part of that cash to pay me - to save on the fees for paying it in
all perfectly legit because the rest of the audit trail is in place

if you have employees and after submitting their RTI, choose to pay them in cash, it is legal
but you need GOOD records

 

[Lèmence]

Ask them to issue you invoices and you may pay for the invoices in cash.
They will be working as self-employed.

 

[paulears]

Sadly, no they will not! They can supply you with invoices if they wish, but unless they have a valid UTR number, so that HMRC know they genuinely are self-employed, then if you pay them cash, HMRC can come after you for the unpaid employees PAYE, the unpaid employers PAYE and their NI. Even for one day, you should take them on properly, deduct the appropriate tax and then 'unemployed' them.

Obviously, lots of people take the chance (knowing the risk, or not). However, let us assume these people could be claiming benefits, and reveal at their next interview they worked for one day. They reveal your details. This is passed to HMRC to then investigate every single thing in your accounts, taking perhaps a year - would your business practice stand this scrutiny? Another risk. Up to you to decide - but having invoices in your records showing you paid people who were not genuinely self-employed can be a risk. A gamble really. I have lots of people who are self-employed provide me invoices. I've not yet found a way to check if they are genuine. Luckily, most are well known in our work area, so their names come up frequently, so I take the risk.

Submitting an invoice is NOT a reliable way of telling if somebody has self-employed status. If you use the HMRC on-line checker, it's not guaranteed - but I suspect the test would fail in your case.

The common 'fail' areas are:
Did you tell them what time to start and finish?
Did you provide them with the tools and equipment to do the job?
Did you pay them by the hour?
Did you supervise them?
If half way through the job, or even perhaps on the morning, would you have been happy with them sending a friend to do the job instead of them.
Do they have public liability insurance and protective equipment of their own?

If the answer to any of these is "yes" to the first 4 and "no to the last two - they were really short term employees, not self-employed.

Not comprehensive - but the kinds of questions I would expect

 

[The Byre]

I know this thread is old and aught to be in retirement, as it has grey hairs on its legs and can't run for busses like it used to, but this caught my eye -

I have not seen a cash payment to a staff member ever in my entire working life.

When I was a student, I also worked shifts at Appleby-Froddingham Steel Works in Scunthorpe and we got paid in sealed little brown seed packets and these had the following written on the outside -

Check that the contents of this envelope agree with your payslip BEFORE opening envelope!

 

[Newchodge]

I have just come across this thread, even though it i s ancient, and it is completely wrong.

The OP is paying two members of staff £10 per hour for 6 hours per week - £60 each. Unless he has other employees, or his employees have other employment, he does not have to run payroll as they are earning under £112 per week. So, in these circumstances they can be employees and paid cash in hand.

 

[The Byre]

and it is completely wrong.

It's about time somebody stated the bloody obvious - and there was me thinking I was dreaming!