Taking on an ‘employee’ working as self employed

To pass the self employed test as far as hmrc are concerned they would be able to turn up when they like and go home when they like (or not turn up at all) and then also be able to send someone else to do the work instead of them.

Otherwise they are employed and you would need to set up as an employer

https://www.gov.uk/employment-status/selfemployed-contractor

Cupcake248 wrote: »

Hello,

I’m self employed and looking to take someone on to help with workload. My thoughts were to have someone working for me but on a self employed basis.

What type of person do I need to see for advice on a contract? I have concerns about work being ‘poached’ so would need a strict contract in place...

Any help greatly appreciated as google isn’t being any help!

Thank you!

Strict contracts are for employees. If you want all of the benefits and none of the responsibilities, that's not going to happen. If a subcontractor on some work for you is their own business for themselves, then they are allowed to compete with you. It's called a free market economy.

It's going to be impossible to prevent your contractor from working for a competitor (unless the role is a tight-deadline one-off thing where it would be reasonable to say that due to the nature of the project you need their time exclusively over that short period), but you can absolutely have terms in the contract about them poaching your clients if that's what the concern is.

The way to do it is probably not to say "you will not", but to put in a penalty clause saying here's what you agree to pay me in lieu of the lost relationship if you do (a multiple of the average of the last three years' annual fee income from that client, or whatever). Or perhaps the two in conjunction.

You can also approach it from the opposite direction and put a clause in your contracts with your clients to say that if they engage directly with your contractor (including as an employee) they have to pay you a finder's fee - since, in a way, you will have acted as a recruitment agency - equalling x% of all amounts paid to him for the next n years (equal to the difference between what you would have paid him and what they would have paid you, but obviously you wouldn't actually spell that out ).

You can also also add clauses to the effect that your contractor must tell you if one of your clients makes such an approach to him, and your clients must tell you if "any of the team at MyFirm" makes such an approach to them. Might work as a deterrent.

You need a lawyer to help you with this. It's going to depend heavily on context and outrageously unreasonable contract terms run the risk of being struck out in their entirety if challenged (rather than the court substituting something that they think is more reasonable). For example I was asked to sign an employment contract containing a non-compete clause so badly drafted that the effect would have been to prevent me from working in my profession for two years after leaving. This was in conjunction with a two month notice period. Solicitor said just sign it because it won't be enforceable - whereas if you challenge it they might reduce it to something that would be enforceable.

As with all these things, you are never going to remove the risk altogether. People could just lie to you and you'll never be able to prove it. It's all about preventing blatant poaching along with making the "just don't tell him" route fraught with risk... while not having anything in your contracts that makes you look like a paranoid tyrant.

Alternatively, would it be possible to ensure he works behind the scenes and has no direct client contact, so that he can't build up that sort of a relationship in the first place?