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Is the person working for you an “employee” or “self-employed”?

There are special rules for deciding if someone is employed or self- employed. This is called their ’employment status’. If they are self employed you don’t need to worry about operating PAYE.

HMRC have prepared a useful guide if you wish to be absolutely sure of your position and this can be found at www.hmrc.gov.uk/calcs/esi.htm.  The questions, provided by HMRC, are useful as a ready check.

Ask yourself the following questions and if the answers are YES, then they count as an “employee”:

  • Do you require the person to work for you on a regular basis, unless they are away on holiday, or on sick, maternity or paternity leave?
  • Do you ask the person to work a minimum number of hours and do they expect to be paid for that time worked?
  • Do you have to you to provide materials, tools and equipment for their work?
  • Does the person work exclusively for you, OR do they have another job?If you have given the person a contract of employment (and/or an offer letter) and it specifies terms and conditions and uses such phrases as ‘employer’ and ‘employee’ then this may be indicative of their employment status. However note that HMRC and/or employment tribunals will look behind any contract and at the actual working relationship to decide whether someone is an ‘employee’. They could decide, for example, that the contract purporting a person to be a worker or a contractor is a sham if it does not reflect the actual working arrangements.
  • It is worth remembering that although a person may be an employee in the context of employment law HMRC may regard them as having a different for tax purposes.
  • However if they DO have another job, then they are still an “employee” if that job is totally different from their work in your home.

 

 

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