Is your Contractor really an Employee?
Get this wrong and it can result in significant costs. If challenged by the IRD you can be liable for PAYE as if the gross pay were their net; plus liable to pay for stat days and annual leave for as long as they have been employed.
Yet it is not easy in some situations to make this determination. The Courts will consider a range of matters – you need to be sure that on balance these favour a “contractor”:
- Is your legal agreement “for services”?
- Is it clear that both you and them intended for this to be a contractor relationship?
- Do you treat them as self-employed – e.g. no discussion around “leave”; and they pay their own taxes?
- Do they exercise some control over their work – e.g. how they do it; or when?
- Fundamentally – are they working on their own account or do you treat them like an employee?
- Level of integration – they need to not be totally “part and parcel” of your oganisation
So, if you need some help working out this people puzzle, click here to email us. It may be as simple as having a conversation with Mike or Beccy to help clarify your thoughts, we might even shout you a coffee!