Question regarding self employment and rates of pay

Milo90

I have a good friend who is self employed doing routine maintenance ie fixing broken gates, replacing broken wall brickwork, gardening, general sort of things that a handyman does.

He works full time, not claiming any benefits, works approx 45-50 hours a week, pays his landlord £50 a week for the bottom 3 rooms in a shared house and is very happy with the way things are money wise.

We were chatting and he told me that he charges much less than the minimum wage for people like pensioners etc. and charges others the minimum wage (£6.08 per hour).

The pensioners he charges about £5 per hour, sometimes much less.
Often he will work weeks on end doing work for pensioners so in my view he is not earning the minimum wage.

Is he allowed to pay himself much less than the minimum wage ?
or must he charge everybody at least the minimum rates.

He doesn't want to start charging some people more as that is how he gets a lot of his work and people recommend him to others so he gets more work.

I guess the real question is... are people allowed to charge/earn less than the minimum wage if self employed ?

Sorry for the long post but thought some basic explanation was needed on his situation so people might understand more.

Thanks all.

paddyrg

He can charge what he likes, surely? Are you a competitor worried about being undercut?! :-)

seven-day-weekend

Maybe there would be Tax/NI issues here? If he is paying himself less than the minimum wage, then maybe it is tax evasion or something, because he should be paying more tax on the hours worked? (don't know though!).

System

As long as he is paying the correct tax for his income (minus any allowances/ legitimate deductions) then there is no tax evasion. However if his income is low then he may be able to claim some benefits as well.

LittleVoice

Self-employed people are exempt from NMW as far as their charge rates are concerned. (However if someone who is self-employed employs someone else then they have to pay that other person at least NMW of course.)

scheming_gypsy

I think you've mixed a few things up.

He charges pensioners less than minimum wage, just because he's charging them £5 an hour it doesn't necessarily mean he's paying himself £5 an hour. So if he cleans Granny Atkins' gutters and it takes two hours, that £10 will go into his company bank account along with the rest of the days / weeks takings and he'll pay himself a wage.
Just the same way a mechanic doesn't get paid £45 an hour + VAT because that's what you were charged.

Uncertain

seven-day-weekend wrote: »

Maybe there would be Tax/NI issues here? If he is paying himself less than the minimum wage, then maybe it is tax evasion or something, because he should be paying more tax on the hours worked? (don't know though!).

No.

If he were a limited company the he would have to pay himself a salary and the minimum wage apply (in theory) except there would be no way of proving how many hours he had actually worked!

However as he is (presumably) a sole trader he pays tax on his profits which are his charges less materials and other allowable expenses.

If he is willing to spend all day working for ten pounds profit then that is entirely up to him. It is still ten pound more than he would have got sitting at home!

I suspect most of his income is in cash so I dare say he forgets to write a few things down........

Mistral001

This raises a good point. If a self-employed person offers a customer to work for £5 per hour, (below NMW) should the customer agree to those terms. Morally probably not but can they agree to it legally. I mean agreeing to it before starting and paying an invoice which states something like "20 hours work @ £5 per hour, £100" etc. Morally I would probably think it wrong, but is it breaking the law? I am not sure it is. Maybe others here know the answer.

This is unlikely to happen as the OP handyman will probably just make his invoice out like "repair gate and fix fence, £100". even though when the hours were all counted up it worked out at minimum wage.

Mistral001

One other thing here I think is as a self-employed person wanting to attract customers, it is always a bad idea to charge different rates depending on the circumstances of your client in a ad hoc fashion. It needs to be done in a structured manner, such as 20% off for pensioners etc.

He will ataract customers mostly by word of mouth and if a customer hears that he is charging him more than someone down the street then that word of mouth could turn sour very quickly.

scheming_gypsy

but he's being paid to do a job, he's not being paid a wage by the person. He could be paying himself £500 a week so he's well above minimum wage

InsideInsurance

Mistral001 wrote: »

Morally I would probably think it wrong, but is it breaking the law? I am not sure it is. Maybe others here know the answer.

As a sole trader/ self employed person there is no wage involved and no minimum wage to be considered.

I think the morality element is too much of a quagmire to get into as on one side in this case we have something that appears fine in terms of a unexploited person who of their free will is setting low prices as they feel they can achieve what standard of living they want for it but it could be a warning flag in other circumstances of exploitation or use of offshoring etc (the later not really a moral issue but something that certainly some are strongly against.) It is not really a customer job to negotiate the price for a service/ product up.