Workers

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Introduction

For many years tax regulation and case law only recognised two categories of employment status, namely: self-employed or employed.

The reason why so much legislation and case law has built up over the last century to distinguish between the two states can be explained by two driving forces, both of which derive from avarice and money, namely:

• The taxation of self-employed individuals is subject to the more advantageous CIS system, whereas employed individuals must be paid under PAYE. The difference in the costs to the engager and the amount of money an individual will take home under the two different taxation schemes are significant. The fact that the rules for deciding between the two employment statuses are written in shades of grey opens the way for widespread and unreasonable interpretation leading to abuse and tax evasion, which the HMRC are very keen to stop.
• Contracting individuals seeking compensation for workplace injury often find they can secure a higher settlement by proving they were employed at the time of the accident, and therefore attack the larger employer's liability insurance pot instead of any insurance cover they may personally have in put place.

From Marisco's point of view, it is very attractive option to be able to engage and drop individual contractors when they need to fulfill temporary extra workload commitments. It is a bonus if they can pay such individuals under CIS that avoid the higher costs of full employment. The benefits far outweigh the significant disadvantages of not having so much control over a contractor-based workforce.

For a contractor to continue being recognised as being in business on their own account and therefore enjoying the significant tax-breaks and self-determination of being self-employed, they must be able to demonstrate they work for a range of clients and have a fair degree of control over when, how, and who they work for.

Unfortunately, a firm will naturally wish to engage more often those contractors they consider are skilled and can be relied upon to do a good job. The frequency of engagement can rise to the point where the contractor's self employed status is compromised. If the HMRC challenge the employment status of a contractor who has been incorrectly treated as self-employed and paid under CIS, it will give rise to five figure back-duty assessments. A situation that is obviously best avoided.

If the complications arising from constantly having to decide between self-employed and employed status was not bad enough, enter side stage a new classification called worker status.

Employment law has sought to correct many of the unethical practices of large employers exploiting the gig economy worker. In so doing, it has provided a legally recognised solution in the form of a casual worker employment contract arrangement for firms who wish to regularly engage the same individual, who for personal reasons does not wish to commit to full employment and the commitments that involves.

The responsibility for engaging individuals under a casual worker agreement rests with the HR and finance teams.

Further reading:

• HMRC guidance on the casual worker.
• ACAS guidance on the casual worker.
• Why labour-only contractors are an illogical mistake.

Marisco Group

Head Office:
Unit J5, The Fulcrum
Vantage Way, Poole, BH12 4NU

Tel: 01202 474001

Email: accounts@mariscosouth.com

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