i am self employed

[jinie]

i employ one person, paye. but want to change that to self employed , do i need to give him notice of this? i cannot afford to keep him on as employed anymore so do i just tell him of this and say he has to go self employed or i cannot keep him on?

[Milvus]

HMRC aren't keen on self employed having only one customer for whom they work. Check out the IR35 section on the HMRC site. In the end it is likely that HMRC will still expect you to pay NI and collect tax for your employee.
www.hmrc.gov.uk

[New Judge]

This is not as simple as you make it sound. Whether your worker is employed by you or is engaged as a self-employed contractor is not simply a matter of choice (if it was, no employer would take on staff as employees but would engage them as contractors and so save the sort of money in employers’ NI contributions that you are seeking to save).

The courts have been asked to rule on this question many times. The first time it reared its head significantly was in the 1960s when most building companies had no employees but engaged all their workers as self employed contractors – a system known as “The Lump”. The courts outlawed the practice and that set the precedent that has been largely followed ever since.

Broadly, in order to determine the status of your worker a series of questions have to be addressed (and I have cribbed this from HMRC information).

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As a general guide as to whether a worker is an employee or self-employed; if the answer is 'Yes' to all of the following questions, then the worker is probably an employee:

• Do they have to do the work themselves?
• Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
• Can they work a set amount of hours?
• Can someone move them from task to task?
• Are they paid by the hour, week, or month?
• Can they get overtime pay or bonus payment?

If the answer is 'Yes' to all of the following questions, it will usually mean that the worker is self-employed:

• Can they hire someone to do the work or engage helpers at their own expense?
• Do they risk their own money?
• Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
• Do they agree to do a job for a fixed price regardless of how long the job may take?
• Can they decide what work to do, how and when to do the work and where to provide the services?

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These questions do not necessarily establish your worker’s status conclusively but they are a good guide. Before you worry about the mechanics of changing your worker’s status you should establish whether it is legitimate to do so. If you do engage someone as a self-employed contractor when they should really be an employee the penalties are quite severe.

[evil__sheep]

also employing a self employed person (if you get what i mean!) isn't necessarily cheaper. As they are free to set their own rate and have to pay their own contributions, they will usually factor this into their rate anyway

[milly143]

I agree, our sub-contractors seem to cost us significantly more than our own employees.

[buildersmate]

To add to the above advice (which is all excellent), if you did attempt to convert this employee to make him self-employed, you would be dismissing him. You need to do this properly, or (depending on how long he has been your employee) he could take you to ET for unfair dismissal. A self employed person is not an employee - a self-employed person has a 'contract for services'. This idea, for the reason you have given for doing it, is a non-starter.