Interesting self Employed vs PAYE situation

[JackofAll]

I'm currently working for a new-ish enterprise (18 months old) on a self employed basis. I've been working for this enterprise for 12 months. During these 12 months I've worked for the enterprise full time and haven't had any income from any other work.

My understanding is that technically - from HMRC's point of view - I should be PAYE. There was talk of setting up a couple of 3-month contracts earlier this year but it never happened and I've been happy enough to carry on invoicing for my work each month.

I'm currently in the middle of negotiating a pay rise from £12/hr to £15/hr. A week ago my boss offered me £13.50/hr, with a promise to review in 3 months time and aiming to get me up to £15/hr within 6 months. I think he's doing as much for me as he can right now. He's recently started and part of his remit is to reduce costs and increase income to make the enterprise financially sustainable and move out of the 'start up' phase and into being a sustainable business.

I agreed to invoice at £13.50/hr for now with a promise to hassle him about the further increase in my wage in a couple of months time if he set me up as PAYE. I've calculated that being PAYE is worth about £2.5k over being self employed because of holiday pay and pension contributions.

At the end of last week I asked him for an update re. setting me up as a contracted employee. He said he'd spoken to our accountant and our accountant had "nearly had a heart attack" because if I was PAYE the company would have to pay NI contributions equal to 13% of my salary. So he's asked me to stay as self employed for the time being.

So my question is this:

In terms of negotiating a salary increase am I better off chasing becoming PAYE or chasing an increase in my hourly wage?

i.e.

Will I be better of earning £15/hr self employed or £13.50/hr PAYE?*

*Key factor is that although I'm currently self employed I'll now be invoicing for the same amount 52 weeks/year - so I'm going to be getting 'holiday pay' despite the fact I'm self-employed.

Thanks

 

[Ally Maxwell]

You're not self employed. End of story.

 

[JackofAll]

You're not self employed. End of story.

i.e. my employer should set me up as PAYE?

 

[STDFR33]

i.e. my employer should set me up as PAYE?

Yes.

They’ll have a bigger heart attack when HMRC seek the lost tax and add penalties and interest later.

 

[billmccallum1957]

https://www.gov.uk/employment-status/selfemployed-contractor

 

[obscure]

My understanding is that technically - from HMRC's point of view - I should be PAYE. There was talk of setting up a couple of 3-month contracts earlier this year but it never happened and I've been happy enough to carry on invoicing for my work each month.

Nothing "technically" about it. Legally you don't meet any of the criteria to be self-employed and therefore you aren't. Your employer is breaking the law and if/when HMRC find out it is going to be costly.

 

[BustersDogs]

Self employed people don't negotiate pay rises. If a self employed person needs more income they raise their prices, and their clients can choose to pay or go elsewhere.

I'm not a specialist, just an employer, but even I can see you're not self employed. Your hourly rate may or may not go down if they take you on as PAYE, as they'll have to pay your tax and NI out of it, instead of you paying it, but you should take specialist advice if you're not happy with how things are.

 

[Chris Ashdown]

advise your boss his Accountant is wrong and could leave him with a very big bill and maybe a fine if the situation continues

 

[JackofAll]

Thanks for responses everyone - I've taken this up with my employer and should soon be PAYE

 

[paulears]

I'm amazed that in this circumstance, any of the parties could possibly believe they are self-employed. I'm self-employed and the only 'boss' is me! I have clients. They are not my manager, they are quite restricted in what they can tell me to do, and they never tell me how to do it. They can set me goals, they can direct me in their preferred direction and they certainly negotiate prices, but money paid hourly? To do this would require them to be monitoring times like an employee. The fact I'm there is enough for them to know to expect an invoice.

It seems both parties don't understand self-employment. One of my clients always asks me to include certain details on the invoice, and often calls my fee 'wages' - this word never appears on an invoice. He doesn't mean wages, but doesn't really understand why he can't use it.