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I have a cleaner who comes to my flat once a week for 2.5 hours, charging £30. I pay in cash and provide all the materials, but I’ve heard there may be tax and legal obligations and I might even need to offer a workplace pension. Is this true? If so, what do I need to do to ensure I’m complying with the rules?
Helen Jones, partner in private client tax services at accountancy and business advisory firm BDO, says the most complicated aspect of this situation is deciding whether your cleaner should be treated as an employee or a self-employed contractor.
There are no clear definitions, unfortunately, and the factors determining whether someone is employed or self-employed have developed over the years.
The contractual arrangement between you is just one of the things which needs to be considered, however.
Key to HM Revenue & Customs’ decisions on status for payroll purposes are “substitution” and “control”, which consider whether your cleaner has to undertake the cleaning personally or could send someone or involve someone else. It also looks at the level of control you have over the cleaner regarding when the work will be done but also what they do and how they do it.
The extent to which your cleaner is “in business on their own account” and providing similar services to others are also relevant factors. Typically, someone in business on their own account would provide all their own tools and materials. The fact that you provide the materials is something that would be taken into account.
Unless you can show that your cleaner is self-employed you may have payroll reporting obligations. Based on the weekly payment you mention, you would need to understand your cleaner’s other working arrangements in order to decide whether income tax and national insurance contributions (NICs) would need to be deducted from the pay; as the amount you pay each week is below current NIC thresholds you would not have any employer NIC to pay.
HMRC requires employers to operate a payroll and report under “real time information” (RTI) if they have at least one employee who earns at or above the “lower earnings limit” for NIC (currently £120 per week), or who has another job.
Even if an employment relationship exists you will not have an obligation to enrol and make employer contributions into a workplace pension as the cleaner earns less than £10,000 a year. However, they are likely to be entitled to various other rights including paid holiday, statutory sick pay, and maternity, paternity or adoption leave.
Another thing to be aware of as an employer is that you are required to carry out checks to make sure an employee is eligible to work in the UK and to comply with the national minimum wage and the health and safety at work regulations.
For the avoidance of doubt, I recommend that you ensure you are clear on the employment status of your cleaner and both of your mutual rights and responsibilities.
Our business partnership is falling apart
I have worked alongside my business partner for the best part of a decade, but increasingly we are not seeing eye to eye on the future direction of our company. After a recent spat, it seems our relationship is now beyond repair. How do I go about protecting my interests? Can I avoid a messy legal battle in the courts?
Clive Rich, founder and chief executive of LawBite, an online legal support platform for SMEs, says disagreements between business partners are more common than most people imagine. Many such disputes can be successfully resolved through an open dialogue, settling once a fair medium has been found between the two partners. You should put the terms of this agreement in writing.
If the situation has strained beyond this point, resolving disputes in a court setting is likely to be time consuming, stressful and expensive — in all likelihood, damaging a relationship to the point of no return.
There is a middle way. You can refer the dispute to a mediator. This is a proven process whereby a neutral person is appointed to facilitate a settlement agreement and resolve the dispute before either party turns to litigation. Mediators are trained professionals who are neutral and focus on helping the parties to find a solution that works for both of them. The success rate for mediation is impressively high.
If the dispute requires in-depth knowledge, you may try arbitration and have the matter decided by an expert who knows your sector, one whom the parties can trust to come up with a fair decision.
Although in principle mediation and arbitration are not mandatory, some contracts have provisions that oblige the parties to use them even before considering court action. Ask your lawyer to check if this is the case in the agreements you have with your business partner.
Regardless of the dispute resolution mechanism that you follow, it is important to understand from the outset what are your strengths and weaknesses in the dispute. Assessing where you stand will depend on the wording of the agreements you have with your partner, the facts that led to the dispute and the evidence that you have to prove your point of view.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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