How do you determine if a consultant is an employee or self-employed?
When an individual is setting up a consultancy role with a potential client it is important that they are certain if they should be structured as an employee or can they be structured as self-employed. We have outlined below some points that should help individuals decide what way they should set up to ensure full Revenue compliance
Typical Characteristics of an Employee
While all of the following factors may not apply, an individual would normally be an employee if he or she:
• Is under the control of another person who directs them as to how, when and where the work is to be carried out
• Supplies labour only
• Receives a fixed hourly/weekly/monthly wage
• Cannot subcontract the work
• Does not supply materials for the job
• Does not provide equipment other than the small tools of the trade
• Is not exposed to personal financial risk in carrying out the work
• Does not assume any responsibility for investment and management in the business
• Works set hours or a given number of hours per week or month
• Works for one person or for one business
• Receives expense payments to cover subsistence and/or travel expenses
• Is entitled to sick pay or extra pay for overtime
• Is obliged to perform work on a regular basis that the employer is obliged to offer to them (this is known as ‘mutuality of obligation’)
• Has their tax deducted from their wages through the PAYE system
Typical Characteristics Self-employment
While all of the following factors may not apply to the job, an individual would normally be self-employed if he or she:
• Owns their own business
• Is exposed to financial risk by having to bear the cost of making good faulty or substandard work carried out under the contract
• Assumes responsibility for the investment and management of the enterprise
• Has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks
• Has control over what is done, how it is done, when and where it is done and whether he or she does it personally
• Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken
• Can provide the same services to more than one person or business at the same time
• Provides the materials for the job
• Provides equipment and machinery necessary for the job, other than the small tools of the trade or equipment which in an overall context would not be an indicator of a person in business on their own account
• Has a fixed place of business where materials, equipment etc. can be stored
• Costs and agrees a price for the job
• Provides his or her own insurance cover e.g., public liability cover, etc,
• Controls the hours of work in fulfilling the job obligations
• Is not obliged to take on specific work offered to them
• Is registered for self-assessment tax returns or VAT. However the fact that an individual has registered for self-assessment or VAT under the principles of self-assessment does not automatically mean that he or she is self-employed
In conclusion a person who is a self-employed contractor in one job is not necessarily self-employed in another job. It is also possible to be employed and self-employed at the same time in different jobs.
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