to not pay my employee annual leave?

[ISnappedAndFarted]

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.

You are absolutely correct not to give annual leave. She can access the benefits of being an employee by agreeing to become an employee and be registered for PAYE. She cannot choose to have the protections of employment law whilst avoiding the consequences.

I get that she would be difficult to replace but I would start looking. She is clearly dishonest. I wouldn't want her to be associated with a business of mine.

If she bills you for hours worked and there is no need for double hours as someone is covering her role then yanbu and will just have to keep repeating no.

You might want to also address what would happen if she glever goes off sick if she hasn't already as it sounds like she would expect to be paid

By the way when you said you would have liked to sort out employee insurance - not sure if you meant employers liability. Just to let you know if so that you can still do this - it covers labour only sub contractors, volunteers etc basically anyone other than bins fide sub contractors. If she only works for you in a set pattern and under your direction and doesn't provide her own equipment then for insurance purposes she'd more likely be classes as a LOSC and would fall under employers liability legislation

She sounds very unreliable and actually quite morally dodgy. I'm not sure I'd want to employ her at all.

If her work is consistently for the same person, same location and the same hours on a fairly consistent basis, she should really be registered as an employee and paid via PAYE.

If you need a wake-up call: you do know that it is you and not her that will get into trouble with HMRC if they find against you. You will be the one to have to find the back tax, unpaid holiday pay, employers liability insurance, etc.

Yes, it is quite laughable that people are saying that the worker is dodgy when it is actually the OP who is benefiting from this arrangement. I know when the HMRC decided a friend wasn't self employed afterall it was actually his employer they prosecuted. He didn't get into trouble at all once he had cooperated with them.
Don't assume that she won't want to report because she is claiming benefits fraudulently either OP. She is entitled to claim PIP anyway and she may be entitled to housing benefit depending on what you pay her.

I don't see that you can even consider paying her holiday - paid holiday is one of the "badges" of being employed - creating lots of liability for you .

Sounds like you need to agree a very clear contract with her to stop this happening again

She isn't an employee, she's an independent company you give contracts to. You also need to report her if she's claiming benefits she's not entitled to as essentially you're paying her benefits and her salary!

You don't get holiday pay on freelance contracts (i always work freelance) and you don't get to dictate the hours you're employed either. She needs to understand that part of the deal.

At my work we use consultants from time to time. We have to check every single time, using that HMRC checker, to establish that they are not an employee. Our internal guidelines state that you have to check for every 'engagement' on a case-by-case basis. So if we are using him/her for 2 days a week and another dept decided to use the same consultant, for another 2 days a week, they'd have to run a separate check.

Be very careful, make sure YOU are in the clear legally. Maybe advise her to get her own independent advice? And keep out of her business as far as benefits is concerned, that's just muddying the water for you.

When I freelanced I did not expect holiday or sick pay - I built these costs into my charges. However I would take advice to cover yourself. Does she just work for you? If she does HMRC may consider her employed by you.

stick to your guns if she wants holiday then pay then she goes on the payroll give her the choice

Freelancers don't get holiday pay. I think also that if she only works for you, sh is in fact your employee with all the tax and pension NI etc that entails but somebody mote expert will help you out there!

There are very set definitions set by government as to what defines an employee as opposed to a freelancer and those employees are entitled to maternity pay, redundancy etc: You could end up with HMRC chasing you for tax etc so it's worth making sure you get it sorted and with someone versed in company/hr type law as opposed to an accountant who won't necessarily be aware of the technicalities.

www.theguardian.com/money/2012/oct/12/paye-off-payroll-employers-employees-dodging-tax

I had an issue a few years ago where I thought I was freelance but primarily I worked for one employer for about 2 weeks of every month for just over 2 years. I got pregnant and claimed for Maternity Allowance from the government (as I thought I was freelance) who refused to pay saying my employer should pay and I was entitled to Statutory Maternity Pay from them as I was classed as an employee since I was classed as having continuous employment as I had worked for them for 14 days a month from a certain date before I got pregnant without more than a certain length break (I can't remember now but I think it was a week or two weeks). The employer refused that I was an employee and they argued with each other (government and employer) for a year with me getting no money from anyone whilst on maternity leave. I genuinely didn't care who paid me but they were a large employer and had hundreds of freelancers and after my case, they brought in new contracts which say you are ending your period of continuous employment for every booking you get so say I was booked for a week, I'd sign a contact for a week and then another one for my next booking.

Given your set of circumstances, I don't think you should be paying her holiday pay but mainly because it sounds like she's cheating the system and not being reasonable. Also if you did pay her annual leave, she'd be classed even more-so by HMRC as an employee meaning she's eligible for redundancy etc and other employee rights too. Definitely don't pay her!

She's not entitled to paid holiday as a freelancer. Tell her that's would put her inside IR35 and you would need to report that to the taxman as you pay her which automatically means she'll also be looked into. Do you pay her directly or to her company account? If its direct to her account she's also likely to be asked to pay back tax and a penalty for undeclared income not to mention benefits cheating!!

@PurpleArmy working for a single client doesn't make you an employee. You can work for a single client for up to 2 years after which you need to leave to continue being classed as a freelancer and not employee

You as an employer MUST check if she is paying her taxes etc. Sounds like you always knew that she is a benefit fraud and you are covering for her. You both will go down.

@PolarBearkshire

She's not her employer. And no she doesn't. She's hiring an independent company for a service. She doesn't have any right to know about her taxes.

I hire services all the time for my own business; am I meant to go around asking for their tax records? I contracted builders to build my new studio... how do I get their taxes? I contracted a jeweller who specialises on casting to cast several of my pieces in bulk... how do I get her taxes? I conctracted a stonesetter to create settings for my pieces.. how do I get his tax records?

You're talking nonsense.

I used to be freelance and I accrued 1 paid day off for every 12 or 13 I worked. Not sure if this is still the case but it definitely used to be.

Well she just said she knows all about her benefits fraud. She worries more about holiday pay haha! Come on! And yes, you are supposed to know if person is employed by you lawfully with contracts payments etc. How does she pay? Into the bank account under what reference? “Gift”? Haha
It definitely sounds like a criminal arrangement both parties are involved. Tax man will love to have a peek.

@PolarBearkshire

If you hire a plumber to fix your boiler, do you check his taxes? It's the same thing. You're not bringing someone into employment in the company. You are paying someone for a specific contracted service. There is no other connection and you have no involvement in each other's tax affairs.

I've contracted out my self employed services and id have told them where to go if they asked for my tax records... it's nothing to do with them.

You don't seem to understand. Don't spout advice when you don't understand.

I receive an invoice with their bank details and I sent the payment. I use the reference if they include one, and my business name of they don't. It is standard practice. Their tax records are not my concern. Educate yourself before you post again.

She is a benefit thief. If she is claiming that she can't work, then she should not be freelancing for you. I think you need to distance yourself from her.

Who owns the company, you or her? Grow a pair.

Thanks @Baaba, good to know the timescales.

OP you clearly consider her an employee as you have referred to her as such in your thread title?

you are supposed to know if person is employed by you lawfully with contracts payments etc. How does she pay? Into the bank account under what reference? “Gift”? Haha It definitely sounds like a criminal arrangement both parties are involved. Tax man will love to have a peek

How embarrassing for you Polar. You don’t even realise you’re speaking rubbish.

I pay someone most weeks to do work for my business. They’re self employed and I have no dealings in the tax they pay or don’t pay, nor am I obliged to.

HOWEVER...saying that...op you’re talking about paying this person for their usual ‘hours’ - in terms of self employment that may well be shaky ground and it’s not solely up to her to ‘insist’. Technically she could try suing you for employment rights and backdated benefits if it seemed she was an employee not a contractor...and paying someone weekly for X hours every week does sound very much like employee territory.

I would do some research tbh and would change the agreement to another method of earning other than hours worked, to cover yourself.