Using Sole Traders… What Are The Risks?
As an agent, we’re used to being the bad guys, recruitment has become a dirty word in many industries, but a good agent who keeps on top of proper regulations and looks after their team is an asset to both sides- and that includes AWOL Customers. So, why not sole traders? You know, the mate of your head chef who is offering their services for that pesky holiday someone is taking at a much lower price , rather than the agent who emails you once a week before you’ve had a half chance to review the rotas?
Well, there’s a number of issues and here are a handful…
- False self-employment – Sole traders are not limited companies and are providing you a service under the IR35 regulations. If they are under what HMRC defines as Supervision, Direction or Control in your outlet, then it is deemed as false self-employment and you may be liable for tax, national insurance and other contributions, as well as the trader themselves. The tax man is desperate to clamp down on false self-employment and this is an area that is being tightened up with every budget statement.
- Insurance – If you’re using someone you do not employ, did you know they should have insurances? A reputable agent will be able to confirm how their staff are covered quickly and simply. Insurance is available to sole traders and other limited companies and they should be able to show you the certificates that prove they have up to date insurance. It is your responsibility to ensure that they have the correct insurance for the service they provide (especially when it comes to food service and the public).
- References and Right to Work – Did you know that there is an obligation to check and prove that someone has the right to work in the UK? That includes holding a verified copy of their proof of identification and their address. Best practice is to follow a minimum of 2 references as well, so that you can ensure someone’s CV is accurate and to get an idea of how they might fit into your existing team.
So, the risk of fines and back charges for NI contributions and taxes if someone is found to be ‘falsely’ self employed- and you’ll have to spend time proving that the worker isn’t under SDC to make your point, following up proof of insurance, right to work, residence, and company status and making sure that references are in fact ‘the real deal’. Just a few problems facing those who currently use freelance staff. We know that agencies don’t always get it right either- if you’re being asked to pay a member of agency staff directly, you should investigate how that agent employs (or not as the case may be…) their staff to make sure you’re not exposing yourself to more risk.
A reputable agent should:
- Confirm that their staff are employed
- Never ask you to pay staff directly
- Be happy to explain what insurances their staff are covered by and provide proof if required
- Know what verified documents they hold on file to prove that their staff are who they say they are, and that they have the right to live and work in the UK
- Understand that these are reasonable requests and respond quickly if asked