To ask advice about a zero hours contract

[VeepVeep]

I'm a long-time self-employed/sole trader/freelancer. Coming up to 25 years.

Recently taken on a new client. In advance of some work in Jan, they've sent me a zero hours contract. Initially, I was okay with it - I just thought it would mean no-rights etc. But looking at the terms, they've a) broken my daily fee down into hours (fine) b) will be deducting income tax and national insurance in respect of hours worked in the preceding month.

I've never had my tax/NI taken at source.

Is this a given with these contracts?

Can I get around it anyway? I've already negotiated my fee, and I know i'll end up with even less if I go this route.

If they are treating your work as PAYE then they are classing you as an employee not freelance.

They don't seem to understand that you are self-employed.

we've been talking at length about me working closely with them, which is great. But I didn't even twig when they said zero hours contract that I'd be on the pay roll. I've never had experience of it. They absolutely know I'm self-employed freelancer.

Have I been really naive?

What's the best way to proceed?

Sorry, I did NC initially for this post but it hasn't carried over to phone

A zero hours contract is. Or the same as a freelance contract. Don't sign that or work for them until it is changed!

I almost came a cropper with this.

Are you happy to become their employee and carry out the work on the terms given?

@rabbitfoodadvocate - sorry, I was unsure what you mean. Is it the same as a freelance contract?

@BarbarianMum - I don't want to go onto the payroll and potentially lose money, no. I have no issue with no rights - I've never had employee rights - but going on payroll is different, I think

It's NOT the same. A zero hours PAYE (tax deducted) contract means you will be an employee of the company. They will not be a client.

How do you normally get paid for your work?
Any chance you can send the contract back, telling them your terms and conditions?

I'm self-employed, and charge per meeting (which works in my profession). I don't discuss the number of hours I allocate per meeting because I don't expect my clients to be counting them, that's my concern. I would not accept a contract in any shape or form to be honest, and turned one potential client away a couple of months ago for that reason.

I have done the same job on a zero hours contract and there was no benefit to me. A tiny amount of holiday pay, no sick pay (because the hours weren't regular enough) and deductions being made from my wages. Also, the hourly rate I use for my own purposes is much higher than they were paying.
I'd think twice before accepting this, unless you're desperate for their custom. I would go back and politely explain that there seems to have been a misunderstanding - I'm self-employed - here is my SLA and these are my rates.

I always invoice, sort my own tax/NI, and have done for 25 years. I can't think of a time when this was any different; even on long-term, fixed contracts.

I have, previously, signed freelance contracts - mostly, for the purpose of NDA's and confidentiality/not poaching agency clients - and I have zilch problem with this.

In the lead up to receiving this, we have had many meetings about it and their desire to work with me was always clear and authentic. We negotiated my daily rate. They did, initially, offer me a retainer, which I declined, as it didn't work for me. They said they would send me the contract before Xmas - I said fine. We had a final call the end of the week before Xmas, ran through details and I was told it was a zero hours contract - again, naively, I said fine. I had no idea this would be a payroll contract.

They are a lovely bunch of people, but I don't wish to be on anyone's payroll. It's not in my interests.

I guess I need to tell them this.

This sounds like disagreement about whether you are employed or self employed.

They are having a huge crack down over companies regarding contractors as self employed when really they should be employed, which leads to more tax and NI being paid.

Because a lot of 'self employed' people only had that status for tax purposes, and are really employed, ie are under the supervision, direction and control, I think the words are, of the employer.

On threads about people claiming benefits, people always say they should crack down on tax evasion/avoidance instead/as well. So that's what they are doing .

Well, I can understand that @BarbaraoofSeville if I was being contracted to work for the company several days a week over a long period etc. BUT, currently, it's initially just a couple of days, with a view to more - but I've been clear that I don't want to give up my other clients, so I won't be committing to too much.

I always pay tax and I always pay the right amount.

Naive question here.

If you earn say £50,000 a year then isn’t the amount of tax you pay through PAYE the same as what you’d owe by paying it yourself? Either way the tax allowance, 20% tax band etc is the same, surely?!

No it's not next. NI is lower (no employers NI for a start) and you can claim expenses such as travel that employed people can't.

The 'right amount of tax' for a self employed person is less than that of an employed person. Self employed people also sometimes work through limited companies and pay less tax that way.

I think public sector employers have stopped working with self employed contractors and some private sector ones may have a blanket ban too so they don't get tied up in any investigations into such practices.

Oh ok I didn’t know that.

Why don’t we all become self employed then!! Sounds as though it’s worth investigating!!

Ah next issue!! No sick pay. No holiday pay and feckers who don't pay invoices by 30 day mark. Currently waiting on 3k. Not bitter Lol!!

First thing I would do in your situation is check the HMRC guidance on what defines an employee or S/E person. There used to be a very clear guide including a flow chart which I assume is still there.

If it clearly shows that you are S/E which it sounds like it will, take that to the company when you speak to them. It could be that they're nervous about getting it wrong (maybe they've had status issues before) or maybe this is just how they like to do things.

It's a bit strange.

Because if you are self employed there are rules around working for only one employer, as most of us do. Because essentially, you are your own employer so are responsible for your own NI contributions, pension etc etc. Which is why self employed hourly rates tend to be higher than employed salaries broken down.

It is probably IR35 tax. The company you do regular freelance work for will be deucting tax and NI as per this rule.
What is IR35? Does it apply to you? How much are the extra taxes?
www.contractorcalculator.co.uk/what_is_ir35.aspx

We have had to stop employing freelancers on free lance contracts as there is a lot of case law around it. In the event of a tax inspection for the business HMRC will determine whether they will consider someone to be employed or self employed - and there are pretty strict rules around this to do with whether you can do your work as and when you want to and substitute someone else to do it if you are unavailable. In our company the majority of people we were employing as freelancers would have been considered by HMRC to be employed.

This means that the company would be liable for ensuring their tax is paid and if they didn’t pay tax it would be reclaimed off the company. Basically to stay compliant with HMRC and avoid potential future liabilities we have to put them through payroll on a variable hours contract. They also are entitled to accrue paid leave etc as they have the same rights as other employees

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

Might be worth a look!

Also S. Emp and have come up against this.

Self employed pay less tax but as others said no sick pay, no holiday pay, risk of not being paid at all and no guarnateed hours. I have had nothing at all from end November and don't expect anything until mid Jan when people get their act together again.

Compnaies are worried though - and all because some compnaies misuse the SEmp thing to avoid responsibilities.

Sorry - hiddeous typos

Contracts work two ways - if yiu are nit happy with some clauses cross them out before signing