Why do companies hire employees?
in Employment, jobseeking & training
22 replies 877 views
I'm trying to understand what the appeal is for companies to hire staff on payroll rather than just demand that their employees register as sole traders or their own LLCs and then invoice the company for their time on a contract basis.
It seems to me that this would benefit the company by obtaining the same work while eliminating their obligations to pay employer national insurance contributions or any sort of pension. This saves the company money and also provides them with more contract flexibility.
I'd imagine there are some finer points I am missing. Can anyone on here elaborate? Nobody I know in real life can answer this.
Latest MSE News and Guides
Martin and MSE campaign win
April's 20% energy price guarantee hike postponedMSE News
Childcare budget boost
More support for children from nine months and those on Universal CreditMSE News
Energy Price Guarantee calculator
How much you'll likely pay from AprilMSE Tools
Also people register self employed may charge the company more to cover paying tax and ni. Therefore employing someone as an employee will work out cheaper.
Why do you want to know this?
Actual mortgage stating amount £75,150
Overpayment start date 1/3/23.
Starting balance £66,565.45
Current balance -£65,553.80
If you are told where to be, when to be there and have equipment provided, you are classed as an employee.
So a shop worker who is given set hours and a till for example would satisfy all of those requirements.
It tend to go in and out of fashion depending on the laws and tax rules.
At the moment I'd say it's out of fashion and tends to cost employers more.
I do know some people who are wealthy self-employed but most of us aren't wealthy at all.
I think it would be really messy for companies to use solely self-employed people because they'd have all those invoices coming in every month and they'd need to employ extra financial specialist staff, as well as staff to assess what workers were needed and to distribute work appropriately. So probably not much gain. But a big headache for those few members of staff who had all the self-employed people to control and pay.
Hmmm. All this is making me have second thoughts about being a freelancer!
P.S. and N.B. All my own work/thoughts and opinion, though.
The next problem is that you typically pay contractors more than employees because they have to pay for the pension etc
Thirdly, if you are going to do it properly and try and make sure they arent deemed as workers or concealed employees their contract is going to have a whole host of clauses about them working where and when they like etc which makes it damned hard to ensure you've got the 300 call centre agent's bums on seats ready to take calls at 8am when the lines open or get people to do the less palatable shifts.
Many companies suffer from staff turnover issues whilst they have notice periods, training programmes, benefit packages etc... turnover of contractors/agency staff is much worse because there is no long term commitment from either side
The list goes on and on