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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

to not pay my employee annual leave?

141 replies

ISnappedAndFarted · 20/09/2018 17:49

I run a small online business which, due to my FT job, I cannot run myself. It has premises which I'm tied into, so I can't just give it up, plus it's my baby so I don't really want to.

An old colleague of mine offered to step in whilst I'm away and she now freelances for me, running the business.

I wanted to employ her outright (ie. get PAYE registered etc) and have employee insurance etc however she wanted to be self employed and so invoices me each month for her pay.

I've found out that she's also claiming benefits and is not declaring the money I pay her - she is claiming housing benefit and PIP, possibly others but I'm not an expert.

She is going away in a week for a holiday and obviously won't be in the office for this week.

I have calculated her hours for this month and messaged her to invoice me for that total.

She is saying that she wants to work the hours she would usually be doing in the week she's away, but the following week - so doing 0 hours one week and double the next, to make up the missed hours.

Except the nature of the business means that there will not be a need for her to do double the hours in that week. She'll just be sat there.

I'm having to make continguencies for her being away for that week that will be affecting business income, which is completely fine as obviously she can't work endlessly.

I've told her that she's not needed for double hours and whilst she's welcome to take the week off, as she's a freelance employee she isn't entitled to annual leave. She is not happy with this and wants me to either pay her for that week, or allow her to do the extra hours.

AIBU?

Obviously if she were a permenant member of staff, I'd have to pay her annual leave etc but it was her choice not to be.

OP posts:
ChilliPowderMild · 20/09/2018 18:13

If she is coming to your premises on a regular basis to carry out work for a set number of hours per week, and not doing the same for other enterprises, the definition of self employed is rather shaky.
There is no council benefit that depends on you being sick. These benefits come from the DWP, and the receipt of them acts as a gateway to claiming benefits such as housing benefits from the local council. She may be able to earn a certain amount each week with certain benefits.

This is all irrelevant, however, as she doesn't have a leg to stand on. She is avoiding tax and national insurance. She either puts up or shifts out. You cannot be phoning ACAS to complain about your working conditions when you're on the fiddle.

flowerpott · 20/09/2018 18:13

If she is legitimately self-employed (there is a HMRC checklist, you/she can't just decide) then she works as much as you instruct her to. She doesn't qualify for holiday etc unless it's part of your contract, or if she's on some sort of retainer / minimum commitment contract. If your contact specifies x hours per week, she can reasonably defer them, with notice and but with some sort of prior negotiation.

I'd guess it's not worth getting into an argument over, disputes will cost more than her weekly fee and resulting bad feeling. Can you replace her easily, for example, if she chooses to quit?

Maybe try and negotiate a compromise, you won't pay her for the week, but she can work 1/4 extra hours for 4 weeks and get paid in lieu?

Her tax affairs and benefits are her own business, (providing she is legitimately self employed). If you suspect she's committing fraud, you have a bit of a moral obligation to report to HMRC, but at the very least, make sure you're documenting all invoice payments and have a record of her UTR.

Original poster
ISnappedAndFarted · 20/09/2018 18:15

The gov site is saying she's a freelancer

OP posts:
DarlingNikita · 20/09/2018 18:17

I have been freelancing for 10 years and it is unheard of to be paid for holidays or when sick/not working.

Yes, me too (well 12 years) and I totally agree. She can have the flexibility of being freelance (or use it to dodge paying tax) but she can't also have the benefits of being an employee! Don't let her guilt-trip you.

Original poster
ISnappedAndFarted · 20/09/2018 18:17

She has told me categorically that she is self employed as a sole trader, and it was me that advised her on how to register and I did offer to help her out with her tax return as I've been doing mine for years.

She provides me with monthly invoices.

I guess my question is more moral than legal.

Am I morally obligated to pay her for a week she's not working when I know that she is heavily relying on the money?

OP posts:
flowerpott · 20/09/2018 18:18

Also, be sure she is legitimately self-employed, or you will be liable for back payments and they'll come down harder on you as employer than her (although she may also receive sanctions if committing benefit fraud). TBH she sounds very naive and I'd be wary of dealing with her at all.

flowery · 20/09/2018 18:18

There’s no such thing in law as a freelancer. She’s either employed, a worker or self-employed, those are the only options when it comes to employment status (and therefore rights). If she is either an employee or a worker, she’s entitled to paid annual leave.

DarlingNikita · 20/09/2018 18:19

Am I morally obligated to pay her for a week she's not working when I know that she is heavily relying on the money?

No. It's not your business or problem that she relies on this money. And I speak as a freelancer who definitely misses the holiday pay/sick pay/pension etc you get as an employee.

Thingsdogetbetter · 20/09/2018 18:20

She is not highly reliant if she can afford to go on holiday.

Her benefits are what thousands of people survive (scrap by) on. What you pay her is going on holiday money. Don't feel guilty!

flowerpott · 20/09/2018 18:21

No. Morally, the whole agreement when self employed is determined by your contract and there are no statutory obligations. She benefits from extra freedoms an employee does not, and there are no holidays unless agreed in your contract.

Fiffyshadesofgreymatter · 20/09/2018 18:21

No. This is business. Your personal relationship to her, your friendship and support is all separate from compensating her for the job she does. If she's not working then she doesn't get compensated. That's it.

If you want to pay her, then go ahead but what if she wants to have 6 weeks off in a year, or 8.... you never know when it will end. If she wants the benefits of being an employee then tell her you will employ her that way. If you really can't say no to her, then that's not a good position to find yourself in with someone you've hired.

AssignedNorthernAtBirth · 20/09/2018 18:21

If it's clear she meets the legal definition of a freelancer and you're happy for her to continue being one then no, YANBU. Her not declaring the money you pay her is irrelevant to this decision though.

Thund4rcat · 20/09/2018 18:22

Morally yes you should pay her holiday pay. She clearly has not realised that she needed to increase her day rate to cover her holiday time off. It sounds like this is the first time she has done freelancing so didn't realise.

Another solution would be to renegotiate her day rate with her to something that would cover at least 28 paid days off per year. So, give her a payrise, but don't pay her for holiday days.

Sugarplumfairy65 · 20/09/2018 18:23

Why not tell her that if she wants to be paid holiday pay, she'll have to go on the books and become an emplyee

kaldefotter · 20/09/2018 18:23

Don’t even consider paying her annual leave in order to be kind. Her financial issues are not your concern, morally or otherwise.

She’s a contractor who invoices you for her services. If you pay her for annual leave, you’re muddying the waters, which could get you in trouble down the line. It could be costly for you. Do not contemplate doing this

Laloup1 · 20/09/2018 18:25

In your shoes I think I would find a compromise if she has got herself in potential money trouble with this misplaced expectation of holiday pay. Maybe meet her half way if you don’t want to lose her?

Peonylover123 · 20/09/2018 18:26

Whilst HMRC would declare her an employee going on the scale of evaluation for this kind of thing (especially since IR35 came so forcefully in to the picture), as a freelancer she is not entitled to annual leave.

She could not report you or she'd be done for fraud. After this holiday I'd definitely look into formal contracts to protect yourself.

flowerpott · 20/09/2018 18:27

Do not pay her holiday pay if not contractually obliged to. It sets a precedent and calls into further question her employment status. If she's hard up, perhaps a bonus might be an idea, if you've been so happy with her work up until now?

Haggishaggispudding · 20/09/2018 18:28

Don’t pay her because then you’ll always have to pay her.

topcat2014 · 20/09/2018 18:28

There is no such thing as 'freelance', really.

The person is either employed, or self employed.

There is no definitive 'fact' that splits the two, and it cannot just be a matter of choice or preference.

If someone is regularly helping you in your office, on work that you have had to train her for, then that feels like employment to me.

It can be little things like is the person on the company email address book, or how do they sign their letters - ie do they appear like an employee.

Having said that, you have been paying a higher rate (presumably) to incorporate these benefits.

If you have only been paying (say) £9 per hour, then you would struggle to make the argument that this person is so skilled and self sufficient that they of course are self employed.

KatieMarieJ · 20/09/2018 18:28

Does she contract with any one else? If she doesn't she has potentially failed one of the fundamental differences between employment and self employment (iyswim). It sounds like she wants to have her cake and eat it too. I would strongly advise you seek legal advice.

mumsastudent · 20/09/2018 18:28

employed versus self employed - does she have set hours every week that she has to work - re benefits this organisation can work these out? www.turn2us.org.uk/Benefit-guides/Self-employment-and-benefits/Self-employment-and-benefits-print-page

topcat2014 · 20/09/2018 18:29

@peonylover123 IR35 only applies to engagements with limited companies, rather than sole traders.

NaughtToThreeSadOnions · 20/09/2018 18:30

You are allowed to work and claim PIP

Say it slightly louder will ya!

Sorry OP the issue isnt that shes ckaimimg the benifits she is. Your allowed to work and claim both. Infact there is a government push to get disabled people in to work. So even if she declaired what she was earning, which of course she absolutly should, it wouldnt efffect her benefits. Well not PIP, might affect housing benefit abit, as in she might have to make a contribution. But your OP is wrotten in a tone that suggests that shes claiming these benifits and not declaring he income cos these would stop.

For tax and NI reasons yes absolutely she is in the wrong.

flowery · 20/09/2018 18:32

”The person is either employed, or self employed.”

Or a ‘worker’.

If HMRC would consider her an employee then an employment tribunal probably would too.

If it walks like a duck and quacks like a duck, it’s probably a duck. The fact that you refer to her as an employee she initially planned to take her on as an employee means it sounds like the nature of the role and the nature of the relationship between you is one of either employment or at least of worker status.