Employing Casual Labour

[OasisGardening]

I run a gardening business which I have operated on my own for the last 2 years.

I don't have enough work ongoing to need to employ a person, however, based on my experience last year as the business has grown, there are times where an extra pair of hands would be useful for one off jobs, so my ideal would be to employ "casual labour" to bring someone in to help as 7 when I need help.

The nature of this work would mean that it would be a payment by cash / cheque rather than through PAYE, so how would I stand from a PAYE & NI position? Would I still be liable for paying the "employees" tax & NI on what they earn with me?

 

[David Griffiths]

It doesn't matter whether the employee is full time or casual, the same PAYE procedures have to be followed (and the same procedures to ensure that the employee is entitled to work in the UK)

If you fail to deduct PAYE, then you will be liable yourself

No doubt this will cue the normal stream of wailing and gnashing of teeth about the system being unfair, and too much work, but that's the way it is.

 

[OasisGardening]

It doesn't matter whether the employee is full time or casual, the same PAYE procedures have to be followed (and the same procedures to ensure that the employee is entitled to work in the UK)

If you fail to deduct PAYE, then you will be liable yourself

No doubt this will cue the normal stream of wailing and gnashing of teeth about the system being unfair, and too much work, but that's the way it is.

Thanks for the reply.

And there's no minimum work amount cut off for these procedures to kick-in - so even if they only end up doing one days work I still need to go through the PAYE procedures?

 

[sanjiv]

If the helper was self-employed and wrote you an invoice for their work, you would not need to worry about PAYE and NI and they would pay this themselves on their Tax Return. It is only if you employ them that you have to pay them through PAYE.

 

[smo]

I'd go down the cheque payment and let them sort it self-employed basis, you can safely assume that a labourer who works on odd-jobs would be doing this for several companies to allow earning of a decent income, hence PAYE wouldnt be suited as it would be a split tax-code nightmare!

 

[David Griffiths]

Thanks for the reply.

And there's no minimum work amount cut off for these procedures to kick-in - so even if they only end up doing one days work I still need to go through the PAYE procedures?

'fraid so

If the helper was self-employed and wrote you an invoice for their work, you would not need to worry about PAYE and NI and they would pay this themselves on their Tax Return. It is only if you employ them that you have to pay them through PAYE.

I'd go down the cheque payment and let them sort it self-employed basis, you can safely assume that a labourer who works on odd-jobs would be doing this for several companies to allow earning of a decent income, hence PAYE wouldnt be suited as it would be a split tax-code nightmare!

But it's the "employer" that is fully responsible for getting the worker's employment status correct. You can't just decide that somebody is self employed. If an HMRC inspector disagreed they would assess the employer for the full amount of tax and NI on grossed up wages

 

[sanjiv]

I'd go down the cheque payment and let them sort it self-employed basis, you can safely assume that a labourer who works on odd-jobs would be doing this for several companies to allow earning of a decent income, hence PAYE wouldnt be suited as it would be a split tax-code nightmare!

But it's the "employer" that is fully responsible for getting the worker's employment status correct. You can't just decide that somebody is self employed. If an HMRC inspector disagreed they would assess the employer for the full amount of tax and NI on grossed up wages

The worker would decide he is self employed and invoice the OP. It is then surely the workers duty to make sure he pays his tax. The OP is just using the services of another company.

 

[aurel]

does not exist such think as casual labour(tax exempt) , you need to be registered with the tax office as a contractor ,then each time you employ someone (even for half day work) you need to ring accounts office give the details and they will give you a verification code where you will pay the tax for the said worker at the percentage stated by them. You don't decide the tax rate or his employment status hm revenue does that, if it happens to be registered as self employed then they will know , if hes not allowed to work they will tell you that as well ; Just ring tax office with all details of the worker to cover yourself ,if you don't get a verification number don't employ him/her because you won't be able to pay the taxes for that salary and will be considered as black market work. Your accountant should be able to help you with this

 

[David Griffiths]

The worker would decide he is self employed

Plain wrong. The employer is responsible for deciding the status of the worker, and is the one that carries the can if the decision is incorrect.

 

[estwig]

Pay 'em cash outta your pocket.

 

[David Griffiths]

does not exist such think as casual labour(tax exempt) , you need to be registered with the tax office as a contractor ,then each time you employ someone (even for half day work) you need to ring accounts office give the details and they will give you a verification code where you will pay the tax for the said worker at the percentage stated by them. You don't decide the tax rate or his employment status hm revenue does that, if it happens to be registered as self employed then they will know , if hes not allowed to work they will tell you that as well ; Just ring tax office with all details of the worker to cover yourself ,if you don't get a verification number don't employ him/her because you won't be able to pay the taxes for that salary and will be considered as black market work. Your accountant should be able to help you with this

That only applies within the construction industry and the bit highlighted is completely wrong. The main contractor makes a monthly return in which he confirms that the subcontractors are self employed - with hefty penalties for getting it wrong.

 

[sanjiv]

Pay 'em cash outta your pocket.

Don't think that would be very tax effective would it but it depends on the amount of work.

Plain wrong. The employer is responsible for deciding the status of the worker, and is the one that carries the can if the decision is incorrect.

So when I get an invoice from a sole trader, maybe for cleaning my windows or something, do I have to check that he is a sole trader?

 

[David Griffiths]

So when I get an invoice from a sole trader, maybe for cleaning my windows or something, do I have to check that he is a sole trader?

You have to be sure that the work that he does for you is not as an employee, which is not the same thing. If you correctly conclude that he is self employed, it's not your problem if he pays his taxes correctly.

 

[sanjiv]

You have to be sure that the work that he does for you is not as an employee, which is not the same thing. If you correctly conclude that he is self employed, it's not your problem if he pays his taxes correctly.

How can you come to that conclusion? Where do you check this?

 

[RedEvo]

I think perhaps this discussion has gone off track with the window cleaning example. If you hire soneone to work for your business then you need to make sure they are truly self employed so you don't get stung for rounded up Tax and NI is they don't cough up to the tax man, it's been like this for years.

It was for this reason that one man band ltd companies started. I worked in the oil industry as a contractor and at one time you could be self employed. However people didn't pay their tax so the law was changed and the employment agencies stopped allowing self employed status to be used as they were getting stung for un paid tax.

d

 

[David Griffiths]

How can you come to that conclusion? Where do you check this?

The Revenue's view of things is here. However, they clearly err towards deciding that somebody is employed, and the correct decisions are based on a raft of decided cases. That said, it's a useful starting point.

 

[sanjiv]

I think perhaps this discussion has gone off track with the window cleaning example. If you hire soneone to work for your business then you need to make sure they are truly self employed so you don't get stung for rounded up Tax and NI is they don't cough up to the tax man, it's been like this for years.

It was for this reason that one man band ltd companies started. I worked in the oil industry as a contractor and at one time you could be self employed. However people didn't pay their tax so the law was changed and the employment agencies stopped allowing self employed status to be used as they were getting stung for un paid tax.

d

I was not implying that they would not be truly self employed and paying tax. They would be paying tax on their self assessment.

The Revenue's view of things is here. However, they clearly err towards deciding that somebody is employed, and the correct decisions are based on a raft of decided cases. That said, it's a useful starting point.

Thanks for the link. I understand your point. It would be much easier for the OP though if it could just be an invoice. The Employed or self-employed? section makes it clear that he would have to be employed.

 

[E Storey]

The worker would decide he is self employed and invoice the OP. It is then surely the workers duty to make sure he pays his tax. The OP is just using the services of another company.

This is totally wrong. You should not be dishing out advice like this if you are unaware of these basic facts!

It is not the worker who decides, it is HMRC.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792190&type=RESOURCES

 

[RedEvo]

I was not implying that they would not be truly self employed and paying tax. They would be paying tax on their self assessment.

That would be quite a tax system. Is it the 'wing and prayer' method of taxation?



d

 

[sanjiv]

This is totally wrong. You should not be dishing out advice like this if you are unaware of these basic facts!

It is not the worker who decides, it is HMRC.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792190&type=RESOURCES

You declare yourself as self employed so HMRC does not decide, you do. It is when you setup your own business as sole trader/partnership/LLP. I was referring to the casual laborer becoming sole trader. David Griffiths has already explained why this cannot be done.

 

[E Storey]

You declare yourself as self employed so HMRC does not decide, you do. It is when you setup your own business as sole trader/partnership/LLP. I was referring to the casual laborer becoming sole trader. David Griffiths has already explained why this cannot be done.

Again you are talking ********, you can TRY to declare yourself self employed but if you are not, HMRC will not accept it. Kindly stop disinforming people with your incorrect interpretation of UK tax law and employment status, poor advice like this devalues the whole forum.

 

[Richie N]

Pay the member of staff on PAYE. Otherwise like others have said HMRC will see you are responsible and in the event that you have a tax inspection you will need to prove if they are self employed otherwise.

 

[Chris Ashdown]

You tell HMRC that you would like to be considered as self employed

HMRC then ask you what you will be doing and ask some questions relating to your expected work like do you have a financial risk in doing the work, can you make your own desicions relating to the work, does someone else tell you what to do or how to do it for example

HMRC will then decide if you can tradeas self employed or not

 

[E Storey]

This thread does show how difficult it is for someone to make a jump to start employing people.

I feel that the administrative burden for what is currently a one man band is enormous. There are other threads around that seem to say the same.

From my own experience I would agree that clients with 1-2 staff spend a disproportionate amount of time and money (paying me to... ) dealing with the administration and technicalities of paying staff. they are also the most likely to make mistakes that cost them dear later on, or believe disinformation about "ways around" the system which eventually backfire on them.

I hope the new tax breaks for new/small employers do eventually materialise, as I really can't see how the current system encourages people like the op to take the jump into employing people. We've probably put him off for life!

On the plus side, I would say that the new employer department/helpline of HMRC are great. They are very helpful, not overly picky about being called if you have employed people for over 3 years and will even do the calculations for you if you are really stuck. They are the one department of HMRC I can honestly say are fit for purpose.

 

[David Griffiths]

You tell HMRC that you would like to be considered as self employed

HMRC then ask you what you will be doing and ask some questions relating to your expected work like do you have a financial risk in doing the work, can you make your own desicions relating to the work, does someone else tell you what to do or how to do it for example

HMRC will then decide if you can tradeas self employed or not

That's new. When did they start doing that?

 

[E Storey]

That's new. When did they start doing that?

When there's some ambiguity I guess, they certainly never asked me, but then I guess it depends on the information/industry/business type you give and what you later declare via SATR.

 

[Jheath]

I think you'd need to register with HMRC as an employer, there is a certain amount of admin involved in this including an annual return. If you gave your employee a "nil hours" contract you could have them work as and when you needed them, assuming this was agreed by them. If you want to avoid collecting tax and employees NI and paying employers NI, you could decide to offer them so few hours that they remained under the threshold. No doubt someone on here will confirm, but is it about £105.00 per week? In fact, if you can engineer it, there's a "sweet spot" where the employee doesn't pay any tax or NI but the government pay a small amount to maintain his or her pension entitlement. It would be good to check the thresholds on the HMR website and check with someone knowledgable if you're not sure. I'm afraid I'm not the top expert but that is my recollection of the rules.

 

[OasisGardening]

Thanks everybody for the replies - I never expected it to cause so much debate!

 

[payrolloxford]

Pay 'em cash outta your pocket.

If you did that you wouldn't be able to claim the expense against your income. If you only require someone occassionally and you can keep the weekly pay under the threshold for NI, currently £109.90, then it will not cost you any more under PAYE. If you were lucky enough to find someone who had no other income then there would not be any tax to be deducted and paid over to HMRC either

 

[TriciaRidgway]

Please dont stumble in to employing someone. If you go down the employment route, I would recomend going to one of the HMRC sessions on becoming a new employer- usually one in your area every month (phone HMRC business support team for all local events). They show you the "Employer CDRom" & how to use it plus it gives you the chance to ask practical questions about how to implement things in your business - simply. I would also suggest that you view Business Link Website pages about basic employment checklists. Employees have rights & responsibilities, you have rights and responsibilities and you need to meet key employment legislation such as contract/terms, minimum wages, sickness/holiday issues etc. All this is helps making the minefield of employment easier (please note I dont say easy just easier!) and could save you expensive mistakes.
If going down the route of using someone who is self employed, my practical aadvice would be to check/ensure that this person is "working for 2 or more clients and is actively seeking more" as well as checking they supply own tools, choose when & where to work as detailed in the previously advised part of the HMRC website. Before Business Link close, it may be worth contacting them for the factsheets about employment too or check out their website. Loads of correct info with the magic word "free"!

 

[campbeji]

Hi,

This has got a bit complicated, and I think that most people are missing the basic point of this. The important thing you need to know is what is the status of the person you are going to hire, for example

If you look in the yellow pages and find a company 'Bob the Handyman' say and ask him to help you out then you can expect an invoice that you pay and then forget about it, you have no risk of comeback on the basis of PAYE or NI.

The next option is if you employ someone, say the mate of a mate, works in the local factory and is going to give you a hand in the evenings after work. You couldn't ask him to be 'self employed' on the basis of you not wanting to pay his tax and NI. If he didn't declare his taxes you'd be liable if either of you got caught.

Third option is to stuff the system and take a risk, pay in cash and deny everything. I personally wouldn't do this (I know I would get caught if I did) but it seems that everyone is doing it. It's probably one of the main reasons that the country is in the mess its in (Rant mode to off)

Anyhow keep it simple, if you employ a company (sole trader) pay the invoice, employ a person pay the wages, PAYE & NI

Good Luck

Jim