There’s an old expression that says “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck”. It sounds like a reasonable assumption but what if it turns out to be a radio-controlled duck decoy (£42 on eBay) or an american coot (which has toes not webbed feet)? In business it’s important never to take things at face value and to always take a closer look.
Consider all the people that work at your practice – nurses, receptionists, hygienists, therapists, associates, cleaners, the family member that does a few hours to help out once in a while – any one of these people could be a duck decoy. In other words, some of those who you think are self-employed, could actually be workers or employees.
As an employer you are required to check if a worker is self-employed from both a tax point of view and also, from an employment law standpoint. Making a wrong assumption can be expensive as it could result in additional tax, national insurance, penalties and even legal action for failing to fulfil a worker’s rights.
When looking at the employment status of individuals there are three main classifications:
- Worker
- Employee
- Self-employed.
Workers
Considerations when deciding whether an individual will be classed as a worker:
- You are paying them to do work or services in accordance with a pre-arranged agreement;
- They have a very limited right to send someone else to do the work (i.e. they can’t subcontract out the work);
- The business provides them with the tools and equipment they need to do the work;
- They are not working for another business that is engaged with you separately (i.e. not working for a company that supplies services to your business like a cleaning agency).
Workers are entitled to certain employment rights including national minimum wage, paid holiday and other protections. Casual staff and those on zero-hour contracts are usually classed as workers.
Employee
All employees are workers but those individuals with an employment contract are entitled to more rights and protections. For example, they are entitled to all forms of statutory pay and leave as well as minimum notice periods on dismissal or termination. They also have the right to time off for emergencies and the right to request flexible working arrangements.
Self-employed
In short, if the individual is not a worker or an employee, they would be classed as self-employed. From a tax point of view, a person is likely to be self-employed and exempt from PAYE tax if most of the following are true:
- They are in business for themselves;
- They decide what work they do, when they do it and how they do it;
- They can hire someone else to do the work;
- If something goes wrong, they have to fix the work in their own time;
- Their job has a fixed price (i.e. they’re not paid by the hour);
- They provide their own equipment;
- They can work for more than one client.
You can check the employment status of an individual by using the HMRC online tool. There is a disclaimer at the start of this tool that states HMRC will stand by the result provided accurate information is given.
For the avoidance of doubt, HMRC have specifically stated that associate dentists are self-employed and liable to Class 2/4 national insurance rather than PAYE and Class 1 national insurance.
It’s more of a grey area when it comes to assessing the employment status of dental hygienists and therapists. Consider whether they chose their own hours, work for more than one practice, provide their own equipment. Each case will have to be assessed separately using the HMRC online tool.
It’s important to identify workers and employees early so be sure to get all your ducks in a row!
If you’d like to find out more about our payroll services in general, please call us on 01872 300232 or email hello@hivebusiness.co.uk.
