Employing Self-Employed Personal Assistants
Why is it important to establish if my worker is self employed or directly employed by me?
As the person paying for the work, it is your responsibility to determine the employment status of your PA. The employment status is not a matter of choice for the worker.
- If you think your worker is self employed but later is judged to be directly employed by you, you could face significant payments due to HM Revenue and Customs. As the employer, you are directly responsible for deducting PAYE and National Insurance contributions, where appropriate.
Example: In Weight Watchers (UK) Ltd v HM Revenue & Customs (2010), the court ruled that meeting leaders were not self-employed, as claimed by Weight Watchers (UK) Ltd, but employees. As a result, the company faces a bill for PAYE and National Insurance of more than £23 million over the last nine years.
- By not establishing the nature of your working relationship, you run the risk of being legally challenged by you worker for not providing them with their statutory entitlements.
Example: InAutoclenz Ltd v Belcher (2009), HM Revenue & Customs had assessed the company's workers as self-employed. The workers in question were 20 car valeters who worked at Autoclenz's premises in Derbyshire. The Court of Appeal ultimately decided they were employees for employment rights purposes and consequently the workers were entitled, among other things, to holiday pay.
Example: in Young & Woods v West , the Court of Appeal looked at a situation in which there was no material difference between the terms on which employees were employed under contracts for service and a self-employed worker working under a contract for services as an “independent contractor” and the self-employed worker was claiming unfair dismissal. It was ruled that in effect the self-employed person was an employee and the employer could not avoid his statutory responsibilities with regard to safety, redundancy payments, compensation for unfair dismissal and other matters.
How will I know if my Personal Assistant (PA) is employed by me or is providing services as a self-employed person?
Self-employed people are usually identified by the fact that they are in business for themselves and may provide a service to multiple clients. Self-employed people are generally more independent than employed workers. They have far greater control over how and when to deliver the service and who delivers it. They will usually be better able to protect their own commercial interests, although they will bear any financial risk from the business they operate.
A self-employed person must:
- register with HM Revenue & Customs (HMRC)
- submit an annual tax return
- account for his/her own tax and National Insurance payments
Whether someone is employed or self-employed depends upon the terms and conditions of their contract with you. The tax and National Insurance contributions (NICs) rules do, however, contain some special rules that apply to certain categories of worker in certain circumstances.
An employed PA will work for you under a contract that should be fully explained within a writtenStatement of Terms and Conditions of Employment. You are legally required to provide your worker with this written Statement within their first 8 weeks of employment. CILNI can provide you with a template for such a Statement and can assist you to adapt it to your circumstances.
A self-employed PA will work for you under a Service Agreement or Services Provision Contract. Unfortunately there is no statutory definition of such an agreement - it all depends upon the nature of the working relationship.
A General Guide
To assist you in deciding if your worker is employed directly by you or is self-employer, here are a number of factors and tests which the courts have laid down in case law following common law principles.
If the answer is "yes" to all of the following questions, your PA is probably an employee rather than a self-employed person:
- Does your PA have to provide the services for you him/herself?
- Can you tell him/her what to do and to carry out the tasks when and how it best suits you?
- Does your PA work a set number of hours?
- Can you ask him/her to carry out new or additional tasks?
- Is your PA paid by the hour, week or month?
- Do you pay your PA for overtime?
- Does your PA use the equipment provided by you to carry out his/her tasks?
Example: in Hall (HM Inspector of Taxes) v Lorimer , the Court of Appeal looked at a case where a freelance vision mixer work with a number of production companies. In each case, he used the vision mixing equipment owned or provided by the production company and had no real financial risk in any of the transactions. It was ruled that for the period of the engagement, the freelance vision mixer was in fact an employee of the production company (subject to PAYE).
Example: in Young & Woods v West , the Court of Appeal looked at a situation in which there was no material difference between the terms on which employees were employed under contracts for service and a self-employed worker working under a contract for services as an “independent contractor” and the self-employed worker was claiming unfair dismissal. It was ruled that in effect the self-employed person was an employee and the employer could not avoid his statutory responsibilities with regard to safety, redundancy payments, compensation for unfair dismissal and other matters. (It was noted that the “self-employed” worker could subsequently be held liable by the HMRC for additional amounts of tax with regard to payment of PAYE.)
If however the answer is "yes" to all the questions below, it will usually mean that your PA is a self-employed person:
- Have you seen proof that your PA his/her own Public Liability insurance?
- Can your PA pay a substitute to carry out the tasks for you or recruit someone else, at his/her expense, to help them provide the services for you?
- Is your PA risking some of their own money by agreeing to carry out tasks/provide services for you?
- Does the PA provide the main items of equipment needed to carry out tasks/provide services for you and not just use the equipment that you provide?
- Do they agree to carry out tasks/provide services for you at a fixed price regardless of how long it will take him/her to do it?
- Can he/she decide which tasks to do, how to do them, when to do them and where?
- Does your PA carry out tasks/provide services to a number of different people?
- Does your PA invoice you for their work?
- If your PA fails to do something properly, does he/she need to redo it for you in his/her own time and at his/her own expense?
Generally speaking, if you require your PA to carry out tasks/perform services for you:
- in your home
- at specific times each day or week (although these may be varied by mutual agreement)
- in the manner that you determine (i.e. you are in control)
- is paid at an agreed hourly rate for the time he/ she spends working for you
- personally (and cannot send a substitute in his/her place)
your PA will be working for you as an employee rather than as a self-employed person.
What if the answers to the questions on the previous page are a mixture of "yes" and "no"?
There is an Employment Status Indicator on the website of HM Revenue & Customs which you can use to check out the status of your PA. This will be found at: http://www.hmrc.gov.uk/calcs/esi.htm Please note: For the purposes of the indicator, the employer is known as "the engager".
Ultimately, only a court of law or Employment Tribunal can make a definitive decision on someone's employment status, based on the factors described above. Normally if a person is self-employed for tax purposes, they will be self-employed in relation to employment rights. However a court or employment tribunal may come to a different conclusion with significant implications and costs for the employer of the self-employed person.
If your PA is genuinely a self-employed person, he/she will not be covered by employment legislation as he/she is working for him/herself (and is their own boss). They are still however protected by Health and Safety at Work regulations and against discrimination. Specific rights and responsibilities between the employer and the self-employed person should still be laid out in a written Service Agreement or Services Provision Contract.
If your PA advises you that he/she wishes to be treated as self-employed, we can only recommend that that you confirm this using the HM Revenue & Customs Employment Status Indicator and that you act in accordance with the result that it provides.
- Although the Employment Status Indicator can be used as normal for income tax purposes, there are special rules with regard to certain cases regarding the status of a PA for National Insurance Contributions if:
- the PA is a close relative of the employer/service user
- the PA is the spouse of the employer/service user.
- If you decide to use someone who is self-employed you may wish to speak to a CILNI Independent Living Adviser regarding other factors you should take into consideration. Advice is also available from the UK Home Care Association website on http://www.ukhca.co.uk/choosingcareadvice.aspx