To help make your home life run more smoothly, you’ve decided to get a cleaner in for a few hours each week; but if you pay them “cash in hand”, will they be self-employed or your employee?
Not enough hours in the day
Unless you’re super-human, if both you and your partner work and especially if you have kids, it’s becoming virtually impossible to run your life successfully and keep an orderly home without some extra help. Many of us use family and friends, but there can come a point when you may need the services of one of the myriad of individuals who supply part-time help in the home.
It’s not just cleaners; the range of home helps has expanded rapidly in recent years. They include odd-job men, gardeners, nannies, dog-walkers, window cleaners and even the lady round the corner, who does a bit of ironing for you.
In this situation, its common practice for the person providing the service to be paid cash in hand at the end of the working day or week.
Do you worry about employment status
Once the money disappears into their pocket, it’s easy to conclude that: (1) your involvement ends there; and (2) the individual is responsible for reporting their earnings to HRMC and paying the correct amount of tax and NI. In other words, they work on a self-employed basis, not as your employee and it’s not your problem. Unfortunately, this in fact may not be the case.
What are your terms?
There’s no single rule that determines whether or not a home help is self-employed or your employee. It all boils down to the terms and conditions of your arrangement. As a general rule, they’ll be an employee if they don’t have the risks of running their own business. The same will be true if:
- You dictate what work they do, as well as how, where and when they do it
- They have to do their work personally, i.e. they can’t send someone else on their behalf
- They work set hours or days, week in, week out
- They get paid even if you don’t need them, e.g. because you are on holiday
They’re an employee: so now what?
If a home help is clearly an employee, they’ll be entitled to receive at least the National Minimum Wage rate applicable to their age and, following changes made on April 6 2013, you’ll almost certainly be required to report their earnings to HMRC via its new PAYE Real Time Reporting system. In addition, they’ll accrue other statutory rights such as unfair dismissal, redundancy and holiday pay. That’s a lot of faffing about to keep your home clean or your garden tidy!
Is it possible get round it?
No-one in a domestic situation, who just wants a bit of help, wants the hassle of setting up a PAYE scheme. So, should you be thinking of going down the home help route, there are a couple of ways you can get around the potential problem.
Firstly, you could consider going through an agency. You might pay a bit more for the service you require in the long-run but the individual will work for the agency, not you directly. The added bonus here is that if you don’t like someone, or their work isn’t up to scratch, you can easily get a replacement.
Secondly, you can align your arrangement to comply with HMRC’s self-employed rules. Regretfully, there isn’t one single test in this situation, but a home help should fall into this category if they:
- Supply services for a number of people, not just you
- They supply their own tools for the job, e.g. cleaning products and equipment
- They do their work at their own home/premises eg the ironing lady
- They are responsible for putting right any unsatisfactory work at their own expense and in their own time.
As an added layer of protection, you should think about paying a fixed fee for their work (regardless of how long it takes) rather than an hourly rate as this shows they can make a profit or a loss, which is another indicator of self-employed status.