Outsourcing work to others - how do I make sure they are classed as Self Employed?

[Huskylover1]

Hi all,

I work for myself. I am quite busy, so I am looking to get some help from others, in order to cope with demand.

I am comfortable with how to recruit for this (on local FB pages etc), however, I do not want to become an Employer. How do I ensure that these people are self employed? Do I need contracts?

Any guidance would be appreciated!

Hmm I'm not 100% sure but I thought the responsibility was on them. You could get them to sign a contract with you and that be a clause in the contract

"I confirm I am registered as self employed in order to work for XXX and I will be responsible for my own tax and NI"

I think you might be right. I just cannot cock this up and I can't find any guidance or templates on-line.

They need a UTR number from the HMRC

Yes, I know they'd need that, thanks. I'm more concerned that I don't somehow unwittingly become an "employer", but doing something wrong. iyswim.

Ah...sorry...was being presumptious. Yes, a contract drawn up between you, plus make a note of their UTR for yourself

Thanks! Any idea where I can find template contracts?

Also, ask your Accountant. ...mine is an absolute gem, and full of info on this sort of stuff

No idea on the templates though, sorry. I have shareholders that sort my stuff out. Do you belong to a Business Network group ??

As long as they invoice you for their work it’s not your problem. You also need to make sure they don’t have a contract & don’t work fixed hours exclusively for you.

Lots of useful info here:

www.gov.uk/employment-status

There are criteria to decide whether they are employed or self-employed
www.gov.uk/employment-status/selfemployed-contractor

You could join the FSB - your joining fee covers access to template contracts etc and a legal advice line. Well worth it if you are taking first steps in business growth. The are also local govt advice organisations - in Scotland they are called Business Gateway, but there will also be an English equivalent. An advisor from there may help (they are of varying quality!) and they also have learning workshops on stuff like this.

That also means you need to pay them more!

It's not up to you ,or them to decide if they are self employed .HMRC have strict guidelines , if they are only working for you that is a definite no no, they can get round it at the moment by being an employee of their own limited company . You must take proper advice on this, as you could fall foul of employment and pension regulations

Here is a run down of the different statuses from government website(assume you are UK. Remember it is about what actually happens in practice - a piece of paper on its own won’t make someone self employed if all the other things such as the person contracting/employing tells then when they have to work and how, makes them wear a uniform etc..

www.gov.uk/employment-status

Thanks all. I have e-mailed Business Gateway, awaiting their reply. I don't have an Accountant, my returns are really simple so I just do them myself.

Thanks for the link, I'll take a read :-)

Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:

they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit
they can decide what work they do and when, where or how to do it
they can hire someone else to do the work
they’re responsible for fixing any unsatisfactory work in their own time
their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish
they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work
they can work for more than one client

The main part of the guidance that sticks out to me is the payment arrangements.

You need to offer X payment for a certain amount of work and they need to be invoice you for it. If you pay per hour you’re on dodgy ground.

Google IR35. If you pay them through their limited company then I believe the IR35 risk is transferred to that company. Otherwise it remains with your company.

HMRC has a handy IR35 review tool you can use to assess. Key features generously include the right to substitution in the workers contract.

There's strict guidelines, you can't unilaterally decide. There's two kinds of areas here - occasional work eg I outsource my cleaning to my cleaner, she has lots of other clients, and freelancers who set their own hours (and crucially can pass on the work to another if they wish) if they are only working for you it has to be very temporary.

The good news is that it's a doddle to do tax, ni and pension using the hmrc basic tools and nest pensions. Takes me about 10 mins a month.

Whether they are employed or self-employed depends on a variety of factors mainly around the nature of the relationship between you. Neither you nor they get to just choose their employment status.

Regardless of their employment status yes you absolutely should have written contracts with them, for the protection of both parties and for clarity on the various aspects of the relationship and working arrangements.

What kind of work will they be doing?

So much poor "advice" at the start of the thread.

No, someone invoicing you doesn't make them self employed, nor does them having a UTR number, nor would a "contract" between you.

It's the actual working practices that matter as outlined by buildingbackup.

If you act like and employer and they act like an employee, no amount of legal wording in a contract, nor invoicing, nor a UTR, would make them self employed.

Thanks all. Looking at backingups points:

they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit - TRUE

they can decide what work they do and when, where or how to do it TRUE

they can hire someone else to do the work - NO, THEY CAN'T, THAT WOULD COMPROMISE ME

they’re responsible for fixing any unsatisfactory work in their own time DOESN'T APPLY

their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish FIXED RATE, FIXED TIME FRAME

they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work - TRUE

they can work for more than one client - TRUE

Sounds like you are outsourcing work to self-employed freelancers. I do this sort of work - someone I know is a web designer who is really good at putting pages together and making them work spectacularly well. But she's shit at writing copy. So I do that for her, and then invoice her for my work.

The "being able to hire someone else to do it in your place" is a bit of a red herring in the freelance world. My friend and my other clients are paying for ME to do the work as they trust me to do a decent job. Not some randomer I've found online.

The situation you describe is very much a self-employed relationship. You do not need to ask for someone's UTR. In fact, there's no way I'd be giving that to you as you don't need it. The risk is wholly on the self-employed person to declare their earnings, pay tax and so on. I have once signed a "I am self-emplyoed and pay all relevant NI and tax" statement but that was for a lawyer who really loved their paperwork...

What kind of work are they doing OP?