Self employed to employee

duffs54

These are notes from our meeting:


It was explained to the Team the alterations about to take place with the company.She visited the Accountants who pointed out that HMRC were clamping down fast on the self employed and made it clear that as it stands the Employer is liable for any unpaid annual taxes not declared by the self employee. She made it quite clear that she could not put herself in that position with HMRC knocking on her door. There were therefore two options as follows:-
A) For each Employee to become a limited Company themselves submitting invoices, this was felt to be expensive for an individual but would ensure that any taxes due would be the sole responsibility of the individual and for her to become a Limited Company. Having been given those choices the limited Company option was favoured, and in fact was now in operation. The company name would be ***** Ltd



There are still discussions to take place with the accountants and HR people but it is understood that there will be no alteration in pay rates. Everything would remain as it is at present ie paid every 4 weeks and whereas the initial information was that holiday pay would not be paid, this was queried by members of the team and will therefore be clarified when we meet the HR Consultant.
Sick pay would be the Statutory Sick Pay only.
Whilst Holidays and Sickness appears a problem it is not seen at present how it is affordable unless there is an increase in the income from the Council/NHS ( VERY UNLIKELY)




So please peops what do you think of this response?


No holiday pay as she can't afford it, and clearly doesn't want us to be invoicing her either?



Surely she can't have it both ways?

SeduLOUs

No, she can't have it both ways. She does have options though.

She can offer you employment on a lower hourly rate to compensate for the holidays, SSP and potential redundancies she now has to pay. (it is fairly normal for self employed workers to be paid more per hour for exactly these reasons).

Alternatively she can refuse to deal with you altogether unless you form a Limited Company.

As you are self employed, you don't really have any rights and she can just let you go. The only thing you have on your side to negotiate with is if she would have difficulty replacing you with other Limited Company contractors or staff.

duffs54

Sorry more help please:

She only pays us 35p a mile and we claim the other 9p back per mile from HMRC
We claim for our phones, also for buying stationary a diary, pencils etc, car valeting as we take clients out and about and office space per month.

That's all I can think of at the moment so I presume wwe will be out of pocket tax wise.

She still hasn't told us about holiday pay yet.

cheers

But we won't be able to if we are employed, so in essence we will be paying more tax, although she will have to pay our NI.

SeduLOUs

duffs54 wrote: »

But we won't be able to if we are employed, so in essence we will be paying more tax, although she will have to pay our NI.

You will pay your own employee's NI at ~12%, so a lot more than the ~£10 per month Class 2.

Boss will pay employer's NI at ~13% of your gross pay on top of paying you.

You won't be able to claim mileage for your commute to work, but can till claim tax free expenses for travelling between sites which should be claimed from your employer. It doesn't necessarily have to be the HMRC rate of 45p per mile though (my previous employers paid at 25p per mile for example).

You probably need to do some more reading on Gov.uk about the implications and benefits of becoming employed.

LittleVoice

duffs54 wrote: »

These are notes from our meeting:


It was explained to the Team the alterations about to take place with the company.She visited the Accountants who pointed out that HMRC were clamping down fast on the self employed and made it clear that as it stands the Employer is liable for any unpaid annual taxes not declared by the self employee. Actually, my understanding is that if you were deemed to have been an employee all along, whatever pay (other than any expenses) she had given you would be deemed to have been paid to you net of tax and employee NI - so she would have to pay back taxes and you should get a refund from HMRC. She made it quite clear that she could not put herself in that position with HMRC knocking on her door. There were therefore two options as follows:-
A) For each Employee (so it's agreed you are employees now?) to become a limited Company themselves (you don't actually "become" a limited company, a limited company is a separate legal entity but you would use such a vehicle to contract with her company) submitting invoices, this was felt to be expensive for an individual but would ensure that any taxes due would be the sole responsibility of the individual and for her to become a Limited Company. Having been given those choices the limited Company option was favoured, and in fact was now in operation. The company name would be ***** Ltd ("would be" or "is"?)



There are still discussions to take place with the accountants and HR people but it is understood that there will be no alteration in pay rates. Everything would remain as it is at present ie paid every 4 weeks and whereas the initial information was that holiday pay would not be paid, this was queried by members of the team and will therefore be clarified when we meet the HR Consultant.
Sick pay would be the Statutory Sick Pay only.
Whilst Holidays and Sickness appears a problem it is not seen at present how it is affordable unless there is an increase in the income from the Council/NHS ( VERY UNLIKELY)




So please peops what do you think of this response?


No holiday pay as she can't afford it, and clearly doesn't want us to be invoicing her either?
She should reduce the hourly rate for employees to compensate for when she has to pay holiday pay.


Surely she can't have it both ways?

...................

duffs54

So the reasoning behind all this is to cover her butt!
She scared us into agreeing to become employees by telling us we would have to become a LTd company and it was too expensive to do this.

From the 1st of Dec this is meant to happen but as you say she has gone ahead already.

As written on minutes : company name would be *******Ltd.

I feel really stitched up ned to go ob GOV site like SedULOUS said

Thank you

SeduLOUs

To be honest, the fact that you dictate your own shifts and clients means there's a reasonable chance you wouldn't be found to be employees anyway but I couldn't say for certain.

Being an employee isn't necessarily a terrible thing, as long as you get a salary you are happy with (bearing in mind al of the advantages of holiday pay etc and taking into account the things you are going to lose).

Going down the Limited Company route is probably going to cost you more time and effort in the long run, and you will have to file accounts and other documents (with fees) on top of completing your personal tax returns.

Has she considered the possibility that by contracting with you as a Limited Company you could potentially hire your own staff/sub contractors to go and do the work on your behalf?

There's definitely a lot to think about both from your perspective and from hers, and it seems to me that she is jumping wildly into blindness.

Whilst her accountant may be giving her some resonable advice from a financial side of things, I'm pretty sure this accountant won't know all of the ins and outs of the HR issues she could be creating. Just running a payroll costs money and time and has many reporting requirements when compared to simply paying a contractor's invoice by BACs. She will also have to enrol you into a pension scheme soon...

For general employment information that is factual and easy to understand I'd recommend starting here: https://www.gov.uk/browse/employing-people

I hope you manage to negotiate to a position that you are happy with.

duffs54

Thank you SeduLOUs, that is most helpful again.

So we can just remain as self employed and invoice her as I am now, but if she is going to get a bee in her bonnet about it, I'm happy to be employed and get paid holiday (which she says she can't afford) along with a pension. So it looks like she hasn't really looked at the HR side of it like you say.

She charges £14 per hour but pays us £10 per hour, so she keeps £4 for herself, and we get as I said 35p per mile she actually gets 39p from the NHS, so she keeps 3p for herself for admin she says.

Off to look at website,, thank you again

SeduLOUs

duffs54 wrote: »

She charges £14 per hour but pays us £10 per hour, so she keeps £4 for herself, and we get as I said 35p per mile she actually gets 39p from the NHS, so she keeps 3p for herself for admin she says.

Not much room for profit there then so your hourly rate would need to come down for employment to be viable. If she stupidly offers £10 per hour employed then I suspect some or all of you will be finding yourselves being made redundant soon after so it might not be wise to bite her hand off.

Time to start weighing up and valuing all the benefits of employment and getting an idea in your head of what is the lowest employed hourly rate you would be willing to accept. Obviously this is for your benefit and not the starting point for negotiation!

Bear in mind the National Minimum Wage (making assumptions about your age - sorry!) is £6.50 per hour so she can't offer lower than this.

http://www.listentotaxman.com/ is a nice calculator to plug in some 'play' numbers to see what your take home pay would be based on different salary figures, and also shows what the total cost would be to boss lady (gross pay + employers NI).

duffs54

I'm 60 in Dec, so my retirement age is now 66

Thanks for link again