The weather is telling us that the summer is fast approaching and it will soon be time for students to have their summer break and they will be looking to supplement their bursaries with a summer job.
They will of course be looking to get as much as they can for their summer exertions but will the role be ‘off-payroll’ (self-employed) or payrolled (employed)? Worse still, would they fall into the grey area of being a gig economy ‘worker’? Here is a quick guide to what should you consider when you advertise a summer role and look to take on an enthusiastic millennial.
What role will they be doing?
This may seem a simple question but it is one that can evolve in a very short space of time. Work may start with the individual having autonomy to undertake the role but it may change very quickly to a role where they are fully managed by a member of staff. For example, a student tasked with handing out promotional flyers may be used in the kitchen when the weather is bad.
Whether or not an individual is ‘managed’ is a key factor HMRC would seek to establish when investigating payments given to casual workers. A question HMRC is likely to ask is -‘Can you move the individual to another task?’ If your answer is yes, HMRC will suggest that there is a ‘Master – Servant’ relationship and the role is likely to be regarded as one of employment.
Another area you should be wary of is how you intend to pay the individual - will it be by the hour/day/week, will it depend on the work undertaken (piecework) or will it be at the end of the engagement after the individual has delivered their services?
While an agreed fee has to start from somewhere (how many hours will it take) you would be well minded to remember the rates of National Minimum/Living Wage (NMW/NLW), which HMRC publishes every year, as court cases such as Deliveroo have used these in their arguments. Time will only tell whether HMRC will revisit these businesses in their enforcement capacity once all the appeals have been heard.
A contract should always be put in place and we would recommend these are well thought through and, ideally, reviewed by your legal team before being put in place. There are particular dangers where old contracts are plagiarised: our experience suggests that it is easy for adapted contracts to include the attributes of both a ‘contract for services’ (self-employed) and a ‘contract for service’ (employed) within the one document.
If you unwittingly take on a casual worker on a contract for service and fail to make the correct tax and NIC deductions for this new employee, what does it mean for the business if HMRC subsequently identifies that they should have been on payroll?
HMRC can seek restitution of what it considers ‘lost’ tax and NIC – going back up to six years. It can also seek to recover the tax irrespective of whether tax has been paid by the individual as the onus to deduct the tax is on the payer. HMRC would also seek to charge interest and penalties and, in certain circumstances, it can ‘Name and Shame’ the company (online) which can generate unwelcome media attention.
Of course, you may simply elect to put the individual on the payroll and, under certain circumstances, there will be no tax and/or NIC due. However you will still have to consider the NMW/NLW rules, whether certain benefits you give will be reportable and calculate their holiday pay entitlement where they qualify.
The obligations under tax law for a business may result in an individual being employed for tax and NIC purposes, but it is important to understand that tax law is not the same as employment law. Care must be taken to consider the working arrangements for a casual worker for both tax and employment law consequences, not just one in isolation.
For help and advice on the implications of using casual workers, please ask your usual BDO to put you in touch with BDOs Employment Tax specialists, or please contact Nick Duffin.
See also our commentary on the Taylor review of the gig economy.
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