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Self-employed vs Employed

This subject is something we are asked about on a regular basis and we hope this will give some clarity to those wanting to determine their employment status.

Employment status isn’t a matter of choice for either Employer or PA.

It’s a matter of fact, based on key terms and conditions of your working relationship.  Even if a contract says a PA is self-employed, if the facts indicate otherwise then the PA may be an employee.

If you don’t get it right, you could end up having to pay extra tax, national insurance, interest and possible penalties later.

The way to determine this is to follow the HMRC guidelines.  Here they are summarised:

Which one are you?

In order to answer this question it is necessary to determine whether a PA works:

  • Either: under an employment contract issued to the PA by the Employer – in which case they are an employee
  • Or: under a contract for services that the PA gives to the Employer – in which case they are self employed

There is no statutory definition of these two types of contract. It’s the reality of the working relationship that matters. This is what HMRC will look at if you ask them to decide the employment status.

Key questions to help you decide

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?
  • Do they regularly work for a number of different people?
  • Do they have to correct unsatisfactory work in their own time and at their own expense?

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