Employed or Self-Employed: Guidance When Recruiting
The UK arm of the massively successful organisation WeightWatchers International (WW) was recently required to pay nearly £24 million to HMRC. Why? Because it had deemed its 1700 or so class leaders self employed, while the Revenue disagreed and was eventually backed up by a tax tribunal.
WW were convinced their contracts with these people were watertight, but the tribunal looked beyond the clear and unambiguous wording of the agreements. Its findings agreed with HMRC that they had been treated like employees through the rules they had to comply with.
These covered ‘how much they could weigh, what they must wear, the products they could sell at meetings (only WW ones) and the holidays they could take’ They couldn’t sub-contract and had to run their classes themselves; ‘not even another WW leader could attend on their behalf.’
So WW had to fork out employers’ contributions for NI plus all PAYE taxes due since 2001, presumably with penalty payments as well.
There is of course a moral to this story. If you use, or are contemplating using self-employed people in your business, they must not be treated in the same way you would treat an employee.
People who are self-employed are contracted to ensure completion of a service to an agreed standard, not necessarily to complete it themselves. They must agree to the work for a fixed fee or a fixed price. They should present invoices for the work as agreed in advance, those invoices to be paid according to agreed terms.
If you use someone self-employed over a lengthy period, take care that the relationship between you doesn’t change to resemble your relationship with your employees. If you wish to terminate an agreement with a self-employed person, never use the term ‘dismissal’ which has employment connotations.
Check with us if you have any doubts about the status of your workers.