Wife been told no longer salaried, has to sort NI and tax - advice please :)

puddles

Okay, so my wife has been working at a hair salon for the last 17 months where she has been an employee, getting her wages every month with Tax and NI taken off and paid by employer. Just this morning she has had a text from her boss to say that she can't afford to keep paying my wife's NI and tax (do employers pay a tax contribution?) because of new pension guidelines. Instead she wants her to be self employed by another member of staff. She also mentioned showing her her to stay under the minimum levels like another employee, to avoid paying NI/Tax!? I think another employee takes anything over the threshold as cash from the till.

Anyway, I just wanted some advice on what she should do next. She enjoys the job but neither of us feel comfortable trying to dodge the system, so will be declaring everything she gets paid. We have never been self employed, so I was wondering where she should start with sorting her NI and tax out ourselves and how much we need to put aside and when do we pay etc..

She gets between £800-£900 a month after tax and NI, depending on how many days she works. She works Wed, Fri and Sat and is paid at an hourly rate, so obviously some months there are more of those days in the month than others, which is why it varies. Hourly wage is £10.50 and she does around 20 hours a week.

Can an employer just decide to no longer pay NI and tax and make someone self employed? I don't really have a problem sorting it all out, once I know how, but I'm a little worried by the 'taking cash from the till' to stay under thresholds' comment and hope she doesn't insist on this.

My wife has never had a contract, but has worked the same days for almost 18 months now. Any help, advice, pointers in the right direction would be very much appreciated. Thank you!

Double_V

If I understands it correctly, the employer wants to pay your wife cash and then she declares tax and NI herself, making her self employed.

I would just leave the place and go to an other reputed salon.
Or first try to talk to the employer that you don't agree and don't like being self employed. If he doesn't agree then leave.
If he is in need he will agree with you.

puddles

I wish it were that easy, but we live in a small town with few opportunities. Does she have any rights to stand her ground?

HappyMJ

There's no income tax to pay on average earnings of £850 per month.

No an employer cannot require an employee to become self employed. They would have to give her notice to terminate her contract. She would then have to rent her own hair salon to become self employed. To be self employed she needs to take on risk and working in another persons salon is not taking on risk as she'll be paid whether she works or not. Self employed people working in other's hair salon can work on a rent a chair agreement and find their own clients and work their own hours. It's unlikely the owner of the hair salon would just give her the customers just like that. If the customers are hers she can take them to another salon and I really doubt the owner would allow that so she isn't self employed.

She also has to provide all of her own equipment. She cannot use any of the equipment owned by the hair salon except maybe a broom to sweep up and that's about it. She'll have to invest in all the equipment required and that isn't cheap.

What the owner saving? Hardly anything. Employers pay employers national insurance and they pay VAT. I really would not recommended doing what she is proposing.

puddles

Although she has never received a contract, does she have one anyway given the mount of time she has been working there, or does it not work like that?

When she started they wanted her to be self employed then, but I insisted she get proper wages every month with NI sorted, and any Tax should there be any. The other employees all get cash in hand in this way too, and always have apparently. It's a children's salon so I guess she's not that worried about clients being taken away. Nobody rents chairs, all clients are booked in with whoever is free, and they get paid for the hours they work not the money they bring in.

Blackbeard_of_Perranporth

I would walk.

HappyMJ

puddles wrote: »

Although she has never received a contract, does she have one anyway given the mount of time she has been working there, or does it not work like that?

When she started they wanted her to be self employed then, but I insisted she get proper wages every month with NI sorted, and any Tax should there be any. The other employees all get cash in hand in this way too, and always have apparently. It's a children's salon so I guess she's not that worried about clients being taken away. Nobody rents chairs, all clients are booked in with whoever is free, and they get paid for the hours they work not the money they bring in.

She'll have a contract. It's just a verbal contract but it's still a contract. She can ask for a written contract at any time.

I'd say then based on what you've just said she's definitely not going to be considered as self employed at all. Mainly due to the "paid for the hours they work not the money they bring in" comment you've made. A self employed person in a hair salon would not be paid by the hour.

puddles

blondebubbles wrote: »

Have you read this?

http://www.hji.co.uk/hair/legal-advice-for-self-employed/

Very illuminating, and seems to indicate she'll be an employee no matter what the boss says, and it could open the boss up to a legal mess of her own.

She did say she would have a chat about it, so we'll see what she says, how she wants to go forward etc. Thanks for all the advice - apart from this 'hurdle' it's always been a great job that my wife really enjoyed and she gets on really well with her boss.

puddles

Does her boss gain anything from my wife not declaring earnings above the threshold? she knows we will want to declare everything but she seems to be selling it as a benefit to us, where as I kind of think it's to avoid her maybe be liable for something, or have I got the wrong end of the stick?

All probably immaterial given she'll be employed in exactly the same manner, so not really self employed anyway!

Thanks for all the replies people - really appreciate it.

HappyMJ

puddles wrote: »

Does her boss gain anything from my wife not declaring earnings above the threshold? she knows we will want to declare everything but she seems to be selling it as a benefit to us, where as I kind of think it's to avoid her maybe be liable for something, or have I got the wrong end of the stick?

All probably immaterial given she'll be employed in exactly the same manner, so not really self employed anyway!

Thanks for all the replies people - really appreciate it.

The boss will gain quite a lot and will gain a competitive advantage over other salons meeting their requirements attracting more customers that are keen to pay less which the other salons won't do as they wouldn't make a profit.

Her boss will save by paying reduced employers national insurance contributions which are 12.3% of an employees wages. Her boss will save quite a bit of VAT on income not declared. The flat rate VAT rate on a business providing "Hairdressing or other beauty treatment services" is 13% of turnover. Her boss will also save paying less of either corporation tax (20% of profit) or income tax (up to 45% on profit) on income not declared.

It's clearly tax evasion and I would be looking at getting out.

puddles

Thanks, much appreciated advice.

Looks like we have an interesting chat ahead of us.