Advice on becomming self employed as a courier

jimbugalee

Hi all,

I am posting on behalf of a friend who has recently been made redundant from a national courier company.

He loves his job and they've given him the option to become self employed. He has a basic idea in his head of what he needs but I said I would have a look at some of the details for him.

Basic info is he''ll be looking at getting about £150 per day (22 days per month = £3400 per month). Obviously then he'll take out a wage, petrol, maintenance on van etc etc.

On this rate would you go self employed or a limited company? I know it's not as simple as that but I thought most small businesses were moving over to limied companies for the potential tax saving. I assumed he would also take the lowest salary without paying personal tax and take the rest as dividends?

Our thoughts were that I am happy to do his monthly books but he would need an accountant for setting up advice and the yearly tax return etc.

Are there any other big considerations?

Many thanks in advance

Gemma

fengirl_2

Sorry, but this is an employer's trick to take away your friend's employment rights. He cannot suddenly be regarded as self employed when he has previously been doing the job as an employee. He will have no job security, no paid holiday, sick pay, or anything else. Moving to a limited company will not make this a self employed position either as it will be caught by IR35. If HMRC quesry this (as they will be bound to do eventually), the employer will be liable for the tax and NIC, despite what your friend has paid.

jimbugalee

Sorry - I'm a bit lost .... I see what you're saying but the company are making all of the employees redundant and then they're self employed but I would assume mainly getting the work from the national company.

I don't know the details i.e. if a promise has been made that he is guaranteed work etc. The work is there, the company are super busy. I just assumed they were cutting costs by trying to get everyone to go self employed.

Is this not common practice? Any more detail would be fab

Apart from the above which I didn't know about previously we are discarding the paid holiday, sick pay etc as he doesn't currently get that now (basically you lose a massive chunk of your salary if you have a day off so it's not worth it). He has also factored in holiday in the yearly profit, making sure he has however many days holiday he thinks is necessary and deducted the pay from the overall picture.

Widelats

Strange, i never heard of getting made redundant and then offered self employment. I don't buy it, i think once he is redundant he will have no rights and that is that, if the company can set him up initially while his rights are intact with a contract from the national company it could be ok, but without a contract he will just be another redundancy.

Horace

You cannot be made redundant from a job and then be asked by the company that you were made redundant from to work for them on a self employed basis. If you are redundant then the job is redundant - if the job isnt redundant then you have a contract. I smell a very big rat.

If he wants to set up in self employment he needs to contact the HMRC as well as having a chat with businesslink as they give free business advice.

jimbugalee

Yes, I see what you are both saying. I assumed the company were doing it to save money and it was perfectly legal. We're talking a national courier company here who look like they've done it before so you would think they must know what they're doing.

I wonder if he'll get a contract. Unfortunately this is the detail I'm not sure on which doesn't help. I will check later today. I have dealt with businesslink before who have been great - I will give them a call again.

Who would be the people to say whether the redundancy situation was fair play/legal?

Horace

He would need to speak to ACAS about the redundancy https://www.acas.org.uk

The law as it stands states that if a job ceases to exist then the person who had that job is made redundant or redeployed into another job within the company. They cannot be made redundant if the job still exists.

Self employment is tricky as fengirl has said - you are responsible for your tax, your class 2 NI and class 4 NI on any profits, there is no sick pay or holiday pay. Although self employment does have its benefits it also has its downsides.

I think that what the company is doing is illegal. Depending on the length of time he has been there would also be dependent on whether or not he could take them to an employment tribunal.

As far as I can see he has no guarantees from them that he will get work for them on a self-employed basis, why would they when he could be considered to be in competition with them for work?

jimbugalee

Spoke to ACAS - very helpful and I understood what they were saying re the redundancy.

My friend is having a consultation with his company today so I've asked him to get them to outline exactly what they are offering and how it would work. We can see exactly what they are planning for him rather than just saying he's 'self employed'

flutterbyuk25

One thing i would mention from my friend's husband's experience, as he does this role as self employed, is that it will cost him a forrtune to take any holiday.

It costs him approx £200/day to cover his round, and he then takes no earnings that week, as all drop payments go to driver. It is also hard to find people to cover the round, especially at short notice.

My friend's husband has been doing the job 3 years, and has only had 3 weeks off during that time, one week of that was for his wedding, and short honeymoon!!

HTH

x

PlutoinCapricorn

Jimbugalee, no ethical company would do this. Some unscrupulous employers are trying it on just to avoid administration and to cut costs by not paying employer's National Insurance, not to mention holiday pay and all the other things that full employees get.

They cannot just retain someone on a self-employed basis unless that person is free to work for other clients, to turn work down, invoices them etc and has more autonomy than the employees. There is a definition of self-employment on HMRC's website.

If the company were investigated, and HMRC found regular payments to a particular person who is not on the payroll, the company might be fined and have to pay all the employer's NI and PAYE.

jimbugalee

Just thought .... would all this change if he was a subcontractor? Or is it the same thing just a different term?

Waiting for him to let me know this evening exactly what they have said about it going forward. I agree with all of the above