Taking on Staff
At some point you may outgrow the 'one man band stage' of self-employment. There may also be an intermediate stage at which you can not take on a permanent employee, but you may need to subcontract parts of your work, temporarily.
Becoming an Employer
If you employ someone full time or even part time, you take on many responsibilities. First of all you have to pay a wage. That means making sure you can pay your employee, month in, month out. There is a national minimum wage set by the government, with which you have to comply. In addition there is an employer's National Insurance cost.
Taking on Obligations
- The employee has the write to a written statement on the terms of employment
- The employee is entitled to receive an itemised pay statement.
- You must take out compulsory employer's liability insurance.
- You are bound not to dismiss the employee unfairly.
- The employee cannot be prevented from joining a trade union.
- The employee must be given time off for certain functions, including public duties.
- You must operate a PAYE system to collect tax and National Insurance from the employee and pay it over to the government.
- You must also operate within your PAYE system the payment of:
• statutory sick pay
• statutory maternity pay
• repayment of student loans
• stakeholder pensions.
With all of these obligations, you might wonder if it is really worth taking on employees. If you subcontract your work out to a self-employed person, none of those obligations apply. Why not, then, simply decide that everyone who works for you is self-employed, and pay them as such, to avoid all the red tape? First of all, you cannot get someone to work for you substantially full time and simply call him or her self-employed. Understandably, the government, and in particular the Inland Revenue, are wise to this.
If you get someone to work for you, there is a distinction in law between a contract of service and a contract for services. On this distinction, the Inland Revenue bases its challenge to false claims to be self-employed. The following tests are applied to any claim to be self-employed:
- Do you work for one employer only, or several?
- Does your employer dictate your hours of work?
- Could you substitute somebody else to carry out the duties?
- Do you have to supply your own equipment?
- Do you carry any risk?
- Can you negotiate your rate of pay?
The consequences of a wrong course of action can be devastating. If you have been employing somebody, but treating them as self-employed, the Inland Revenue can challenge the practice. If they are successful, they can demand from you all the tax and National Insurance which you should have deducted. The Inland Revenue collect the money from you, and the onus is on you, as the employer, to recuperate it from the employee.
Learning the Personal Skills
Becoming an employer means that you have to manage the people working for you. You have to take some time out of doing the actual job yourself to oversee, control and motivate your workers. This comes naturally to some people. Many of the skills needed are intuitive, but many more can be learned. Even if you have a natural talent for getting on with people and managing them, you can still learn to do it better.
