Subcontractors: Employed or Self-Employed

Paying subcontractors correctly and on-time can make the difference between a happy or disgruntled subcontractor and we all understand the importance of a happy supply chain. But how do you know whether you should be paying your subbies on a PAYE basis or whether they can go self employed.

Criteria You Should Consider?

  • Mutual Obligation of Work; does the subcontractor have to accept work you offer to them and are you obligated to offer them such work? Remember to consider things like determined hours of work as well.
  • Supervision, Direction and Control; who decides how to carry out the work. Can the subcontractor decide which tools to use and how to carry out the work required.
  • Substitution; Does the subcontractor have the right to send a substitute and does this happen in reality.
  • Financial Risk; does the subcontractor have to redo unsatisfactory work at their own cost, is the work paid per job rather than an hourly rate.
  • Multiple Customers; Self employed contractors work for multiple customers while a single long term client leans more towards employment.
  • Tools / equipment; Self employed contractors would be expected to have to provide their own tools and equipment for the job.
  • In business in their own account; Is the subcontractor producing their own invoices, do they hold their own PLI, do they spend money on advertising?
  • Other Employees: Are the workers fully integrated into the main business activity, doing similar work to employees

Important cases such as Autoclenz Limited v Belcher [2011] demonstrate the importance of the actual relationship rather than simply putting a contract in place to indicate self-employment.

If you are concerned about the burden of processing payment for a flexible workforce which includes PAYE employees and CIS subcontractors sign up for a free consultation from CE Back Office.




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