Starting a business and hiring self employed staff

[Fiona B]

I am a self employed sole trader and planning on starting a new cleaning business, however it would be using one self employed staff member to begin with. The reason is that I want a soft launch and to test the market before investing (although I will be investing in stock website etc). My question is can I start a business then hire someone to do the work as a Sole Trader or would I have to set up as a Ltd Company? Also do I have to register the business initially or wait to see if it's actually viable before I do that? Any advice would be very welcome!

 

[Scalloway]

You have a bit of leeway for registering as self employed as the deadline is early October 2018. You can employ staff as a self employed business. You need to be very careful about hiring people to work on a self employed basis. HMRC can impose penalties if staff are paid as self employed when in fact they should be employees.

 

[paulears]

HMRC have a great online questionnaire system - you answer questions and it says at the end = your answers suggest you are self-employed, or your answers suggest you are an employee. They also have a mid ground where they say the details do not provide an absolute answer.

I'm self-employed and have had PAYE staff in the past, but now only have two or three regulars who are self-employed like me - and sometimes they work for me, and submit an invoice, and other times I work for them and do the same thing - but while they work for me on the same project - what they do is totally separate - I'm not their boss, their supervisor or responsible for what they do - In my business it may be that I do lights, they do sound, and somebody else does stage management - but the client gets one bill for the job. I cannot imagine how cleaning services would work like this? You'd give them the jobs to do, supply the equipment, check their quality, and perhaps even be on their back if they missed something. They'd start when you tell them and finish at a prescribed time - which if they had to work late, you'd pay them extra? One question HMRC ask is about their hourly rate - this is a good guide to being an employee. My team know the events start at a certain time, and work whatever hours their precise job requires - meaning I may be needed at 2pm, my sound guy will arrive after this, and the stage people last. However - I might simply power down and go - while the other two faff around. I don't even ask. Self-employed people will flag up warnings with HMRC if their income is below the average - so paying minimum wage type amounts to somebody self-employed rings alarm bells. After all, holiday pay, sick pay and pensions would have to be paid out from their minimum wage - making it even lower, let alone insurance vehicles, transport and expenses?

 

[Mr D]

I am a self employed sole trader and planning on starting a new cleaning business, however it would be using one self employed staff member to begin with. The reason is that I want a soft launch and to test the market before investing (although I will be investing in stock website etc). My question is can I start a business then hire someone to do the work as a Sole Trader or would I have to set up as a Ltd Company? Also do I have to register the business initially or wait to see if it's actually viable before I do that? Any advice would be very welcome!

Be wary of classifying someone as self employed, its not a classification you get to make simply because its easier.


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

 

[Fiona B]

Many thanks for your answers, you've hit on exactly the points I was concerned about. I don't want to get on the wrong side of HMRC. I was asking about self employed as the work will initially be self-employed task based work until the business builds. I do a job on this model, ie paid for the work done at a certain rate and it is very successful. I intend to pay for the marketing/stock/arrange work etc and then pay someone self employed when the work comes in. I might give HMRC a call just to discuss this.

 

[Chris Ashdown]

You are still missing the point, you cannot just employ someone who says they are self employed to do a job, if the job does not meet the HMRC specification for self employment.

As a cleaning company you would get a contract and tell your worker when to do the job, how to do the job and supply the cleaning equipment,

They would not have any risk in doing the job, I.e. they are paid whatever happens, so no financial risk to them, and cannot say mid week that their friend is standing in for them. so they are employees and you need to pay them by PAYE

The job dictates if they are self employed or employees.

 

[Mr D]

Many thanks for your answers, you've hit on exactly the points I was concerned about. I don't want to get on the wrong side of HMRC. I was asking about self employed as the work will initially be self-employed task based work until the business builds. I do a job on this model, ie paid for the work done at a certain rate and it is very successful. I intend to pay for the marketing/stock/arrange work etc and then pay someone self employed when the work comes in. I might give HMRC a call just to discuss this.

The cleaners would be able to set own hours to do the jobs? Use own equipment? You are paying them by the job not per hour?

 

[paulears]

self-employment is a status rather than a title of convenience. If one of your cleaners has an accident - would the HSE come after you, or them? If there is a RIDDOR incident then a self-employed person does it themselves, and employer does it on their behalf. If you have public liability insurance it covers yourself. Your people should have their own.

There is also a risk to your pocket. If you decide your people are self-employed. What happens if they accidentally mention you to HMRC when perhaps they are claiming some kind of benefit, or perhaps get singled out as a person of interest by them? HMRC will want their missing tax and NI payments from you. Can you afford this? You can live on the edge, but their unpaid tax, employee and employers NI contributions might have to be paid by you if you got it wrong.

If you read this forum you also find employers having real issues with their staff and getting advice on how to deal with this. Your people have no rules at all. Your only power is to not use them again, and if you fall out with them, and they have never really been self-employed, they could deliberately drop you in it.

 

[The Byre]

What the above are trying to tell you, is that you cannot employ someone and call that employment 'self-employed'. The law makes those two concepts mutually exclusive. @Mr D has given you the link to help you decide which is which.

Be wary of classifying someone as self employed, its not a classification you get to make simply because its easier.
https://www.gov.uk/employment-status/selfemployed-contractor

 

[Fiona B]

Thanks for your answers. Firstly, I intend to get Public Liability Insurance regardless. Secondly, I've done the questionnaire and basically, they will be setting their own hours, getting a set rate for the work they do regardless of time etc etc. The only question I couldn't answer yes to was the first about the businesses success depending on them. I am at pre start stage at the moment and considering all my options which is why I find your answers invaluable, far better to go through all the possible scenarios beforehand then make a huge mistake!

 

[Fiona B]

I am thinking of doing the work myself initially so that I can gauge the market, and really understand all of the processes. I do take the point on board about being their boss and giving out work, so I will take it step by step I think. Just out of interest, I've researched registering a business etc but how difficult is doing payroll, setting up employees as PAYE and so forth?

 

[ethical PR]

I am thinking of doing the work myself initially so that I can gauge the market, and really understand all of the processes. I do take the point on board about being their boss and giving out work, so I will take it step by step I think. Just out of interest, I've researched registering a business etc but how difficult is doing payroll, setting up employees as PAYE and so forth?

Like anything if you know how to do it, it's not difficult and if you don't it can be.

 

[Mr D]

Payroll is a service that some seek to buy in rather than do.

 

[Chris Ashdown]

they will be setting their own hours, getting a set rate for the work they do regardless of time etc etc. !

They are not going to be setting their own hours as cleaning contracts will in 99% of the time will state a period when the place should be cleaned. How would you be able to ensure quality of work if they take say a week off and substitute others to do the work.

 

[Fiona B]

I am also unable to get through to Licensing and I wondered if anyone who runs a business using pressure washers knows if you need any license to specifically run this?

 

[mhall]

Public liability insurance is irrelevant (and it's not a legal requirement). Your very mention of the word "staff" would indicate that you do not actually view these people as self employed and your only reason for calling them so is so that you can dispense with the legal & financial requirements and responsibilities that an employer has. The HMRC questionnaire is a good one and they will usually stick by what the tool says (with caveats that they can change their mind). Hiring self employed people is not the utopia everyone seems to think it is - they come with their own challenges (notably the ability to steal your customers at the drop of a hat). Sometimes it is better to employ people that you can control much easier.

To answer your initial question though - you don't need to be a Ltd company to hire staff or other self employed people, you can do it as a sole trader..

 

[Newchodge]

Payroll, as with many things, is simple until a snag crops up. Then it may be worth using a professional, if you can find one who could give you a reasonable quote.

 

[scstock]

Of course if you are big enough like Uber or Deliveroo you just make your own rules!

 

[AlanGuidry]

You need to be very careful about hiring people to work on a self employed basis. HMRC can impose penalties if staff are paid as self employed when in fact they should be employees.

Many small businesses especially cleaning agencies think that self employed is the best route. But as pointed out HMRC will make a determination as to whether they consider the staff self employed or employees. I would take legal advise before starting up.

 

[Mr D]

Of course if you are big enough like Uber or Deliveroo you just make your own rules!

Think you are thinking of the government there.
Last I looked both those companies were under rules made by other people.

 

[Fiona B]

Thank you all for your replies. I am a great believer in doing things right the first time, so I will be investing in payroll software and I know a few accountants I can ask for advice. I think Limited Company and employed staff sounds safest! Your advice really is invaluable, so once again, many thanks!

 

[Chris Ashdown]

One important thing is to make sure your payment software has the facility to do your pension as well as integrate with your financial software otherwise when you grow the company it gets rather messy

Glad you learnt enough to go the sensible way, good luck with your company

 

[Eric Hawkins]

I am a self employed sole trader and planning on starting a new cleaning business, however it would be using one self employed staff member to begin with. The reason is that I want a soft launch and to test the market before investing (although I will be investing in stock website etc). My question is can I start a business then hire someone to do the work as a Sole Trader or would I have to set up as a Ltd Company? Also do I have to register the business initially or wait to see if it's actually viable before I do that? Any advice would be very welcome!

Hi Fiona, I have started 12 companies in 42 yrs, my first one was as self employed until the crash in 1990, ever since then until 2011, I was always a limited company. Now I am back to working for myself with with nobody employed, just pay people when I want any help, as it allows you to keep your costs under control.
I have a freind of mine doing very well in house cleaning, but she now offers the owners my LED light bulbs to save them energy as a added value service