Pay cut and forced into self employment. Please advise.

mkbswimstar

About 6 months ago my partner and his colleagues were asked to take a pay cut due to the economy. No new contracts have been signed and they has no choice in accepting the cut.
Now the company is requesting that all the staff become self employed.
Is any of this legal?
From what I can tell no benefits are being given to the staff, so if it happens I think he will be massively worse off financially.
Has anyone got any advice?
He has been employed by the company for over 5 years and is paid weekly.
At the moment they are also made to work bank holidays and if they don't they don't get paid or have to take it from their holiday allowance which is the bare minimum.
Many thanks.

simpywimpy

I dont think you can be self employed and work solely for that company. You have to show that you would take on other clients (or something similar) I was self employed doing work at home for a company and the tax office were checking everyone some years later as they should have been employees

FatAndy

Sounds dodgy to me. According to HMRC -

You are probably self-employed if you:

• run your own business and take responsibility for its success or failure
• have several customers at the same time
• can decide how, when and where you do your work
• are free to hire other people to do the work for you or help you at your own expense
• provide the main items of equipment to do your work

You are probably employed if you:

• have to do the work yourself
• work for one person at a time, who is in charge of what you do and takes on the risks of the business
• can be told how, when and where you do your work
• have to work a set amount of hours
• are paid a regular amount according to the hours you work, and get paid for working overtime - even if you do casual or part-time work, you can still be employed

http://www.hmrc.gov.uk/working/intro/empstatus.htm

Perhaps it might be an idea to call into your local tax and see what they think?


p.s. Bank holidays were brought in specifically for people who work in banks, hence the name. They were intended to ensure that people who worked in banks had time off to play cricket! The world was a different place in 1871. So unless your partner works in a bank (and plays cricket) he won't have any legal entitlement to time off on a bank holiday.

maninthestreet

mkbswimstar wrote: »

At the moment they are also made to work bank holidays and if they don't they don't get paid or have to take it from their holiday allowance which is the bare minimum.
Many thanks.

The legal minimum annual holiday entitlement is 28 days (which can include Bank Holidays).

FatAndy

maninthestreet wrote: »

The legal minimum annual holiday entitlement is 28 days (which can include Bank Holidays).

The minimum holiday entitlement is 5.6 weeks which if you work a five day week gives you 28 days. That represents four weeks plus eight bank holidays. There's no legal obligation for your employer to let you take the actual bank holidays (unless you're a banker) but it effectively entitles you to time off in lieu if you have to work them.

If you work more or less than five days a week then your holiday entitlement will be more or less than 28 days depending on how many days you work.

mkbswimstar

Just checking with him but from memory he is given 20 days a year and has to take the bank hols out of these. If he works the bank hol he gets paid his normal rate.
Sounds bad so far!
Feeling worried about his future with this self employed business.
Does he have to do it? mind you if he disagrees he just gets laid off, like his colleagues do regularly when there is less work, even though they are not self employed yet.

FatAndy

His entitlement to 20 days would have been correct up until a couple of years ago, however the nasty Labour government has been increased holiday entitlement over the last few years. The minimum entitlement became 5.6 weeks (equivalent to 28 days) from April 2009 and the year before it was 4.8 weeks (24 days). Prior to that it was 4 weeks, ie 20 days if you do a five day week. It seems your partner's employers are living in the past!

fengirl_2

Its very unlikely that HMRC would accept that these people were self employed if they were doing exactly the same job for the same employer. The employer is trying to duck his reposnsibilities in terms of NIC, holidays, sick pay, maternity pay and redundancy. The workers would have no job security.

PlutoinCapricorn

I wonder whether the employer knows that they could get into big trouble if this went ahead and HMRC investigated them.

I also wonder whether the employer is aware that self employed people usually charge a higher rate than an employee doing the same work would get, just to cover illness, times when work is not available etc. Employers are happy with this because freelancers often have short term assignments: they do not work 9-5 five days a week for the same company over the long term.

I suggest Citizens Advice and ACAS: by making you self employed you will lose some of the benefits and pension etc. that Class 1 NI gives employees. Self employment should always be a choice by the person doing it.

mkbswimstar

Thank you all for your advise so far. I have checked and he gets 24 days holiday at the moment. And he thinks he will need to ask £5k a year more from the employer to cover holidays, liability insurance etc.
The boss is doing this to cut costs, so I can't see a pay rise in it at all, especially as he had a 10% pay cut recently.

fengirl_2

In my opinion, he shouldnt sign up to this at all, even if there is allegedly more money in it. When HMRC finds out, they will put a stop to the arrnagement anyway.