Understanding the differences in employment can be challenging. The subcontractor’s engagement status could be questioned by HMRC, even if you have a contract and procedures in place. They may argue that they are workers or employees of your company.
The process of engaging self-employed subcontractors can be complicated. Tax liabilities and penalties could result in significant disruptions for your business if you get it wrong. Based on a typical electrician as an employee, worker, and self-employed, we have illustrated the differences in employment status.
01.
Job Title: Electrician
Employment Status: Employee
- Works as an Electrician for a large construction company
- Does regular contracted full-time hours Monday – Friday 8am – 5pm
- Reports to a Supervisor who oversees work and sets monthly targets
- Not able to send substitutes to complete work
- All working equipment is provided by the construction company
- Entitled to all employment rights
- Paid a monthly wage via PAYE and taxed as an employee
02.
Job Title: Electrician
Employment Status: Limb (b) Worker
- Engaged as an electrical contractor for a number of local construction companies so not committed to working with one employer
- Able to decide how much work they accept and can turn up and work as they wish
- A degree of control on each job e.g. site foreman will provide a daily list of tasks or make regular checks on quality of work
- Expected to complete work themselves and not send a substitute
- Entitled to core statutory employment rights from day one
- Pay is set by employers for the work completed
- Works under a ‘contract for services’
03.
Job Title: Electrician
Employment Status: Self- Employed
- A highly skilled electrician with their own successful business
- Not obligated to work certain days or times and able to set their own working hours
- Can take on contracts for more than one employer at a time and has the flexibility to decline work
- Is able to subcontract their work if required
- Uses all their own work equipment
- Doesn’t benefit from any statutory employment rights
- Negotiates a daily rate of pay and is responsible for the success of their business (profit or loss)
We know understanding the differences in employment can be challenging. If you have any further questions about employment status or would like to speak to someone in more detail, Indigo has a team of in-house experts that will be happy to help! Get in touch.
