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Advice needed- how are employees paid


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Hello, I'm after advice of how other committee pay their staff. Currently ours are employed on a self employed basis so we expect them to do their own tax & ni. We pay on the last working day of the month for the hours they worked that month. The staff get 4 weeks holiday per year 2 at summer 1 at Christmas and 1 at Easter. Rest of school holidays are unpaid. The staff sign a long term contract with us. However a member of staff has questioned are they employed or self employed, also can we set out rules such as staying with preschool for 2 years after we pay for qualification for them? We are charity registered.

Any advices appreciated.

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My understanding is if you are employed under a contract of service and are on a payroll you are entitled to holiday pay etc.

I would certainly contact PSLA if you are members or any other governing body on clarification of this.

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I am sure this isn't right. If your staff have contacted the tax office to register as self employed I'm sure they would query it. I'm sure they aren't registered if the staff are querying it with you. You can only be self employed if you can decide when you work and could sub out to someone else.

 

I've not heard of any other preschools doing it this way.

 

You need to register as an employer and set up a payroll and do returns each month. It's really easy to do. If they work 38 weeks a year you can pro rata the holiday entitlement which is fine.

 

It does sound a good idea to tye someone in after a qualification but not good to work with someone who doesn't want to be there.

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Hi and welcome, I've never heard of that before, I can't see how they can be self employed and have contracts with you ? Do they all provide/pay for their own public liability insurance ? I think they'd only be covered by the settings insurance if they were employees (under employers liability insurance)...and if they really are self-employed they'd invoice you for hours worked and wouldn't be entitled to any holiday pay, sick pay or SMP from the setting, as above you need to clarify asap.

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Wow, very uncertain grounds many issues could be occurring doing it this way, I agree with above get this checked ASAP. You can in essence lose people at a drop of a hat as you have no hold over them, if they are not paying their nics or tax then they will not be entitled to any benefits such as maternity or sick pay, nor will they be accuring pension contributions. Worse still if they have not ensured they have declared their earnings as per self employed people have to and submitted a return each year they could be facing huge fines! To expect people to navigate their way through self employment yet act as if they work for someone is quite a logistical nightmare - I used to be self employed and Jeeezzz it's not easy talking to tax man or filling out annual returns.

Your contracts with them must be water tight to ensure you are infact contracting in workers, you must evidence their invoices to you for their services.

Really to have them as employees is not much hassle, ensuring you have funds to cover closure and payments of rendendacy is the big one other than that it's either identifying someone to do payroll or contract someone in to do it, yes you will have to pay out more - 20% on costs, possible bank fee transactions but it's a lot easier to ensure staff work for you, and that they can not just not turn up on Monday. For me if you have one asking if they employed or self employed then this says they have not register with inland revenue as self employed and would be looking at facing fines, huge back payments for non submission of tax/nics xxxx

Edited by Foreveryoung
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They still need payslips. They are employed not self employed. If any of them have other jobs you need to start submitting returns to the tax office. At minimum wage for 15 hours you are nearly at the lower earnings limit.,

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Hope it's been helpful reading all the replies, it seems to be a fine line between what's happening currently and how it impacts on their status. They can apply for nics exception if they earn under so much but it then means they pay no nics so will not be entitled to no benefits however this may be the case anyway if they haven't been declaring all earnings. The ni lower limit is or at least was £84 per week, and would most likely be under tax threshold. You do not pay any holiday pay to self employed people so this is where it then contradicts itself and conforms an employee. There is a checker online I believe 'am I employed or self employed' use this think it's HMRC website and have some bedtime reading of all there non English written legislation. xxx

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So if they were employed, but earnt under the taxable bracket would we still have to go through the tax office. It's been this way for years, so needs a change now then. Just a few more questions if anyone can help.

If we used self employed staff would it make a difference to our insurance, we have all that through psla.?

Could we ask employees to sign a contract?

How do others pay staff?

A bit about us.

We are a small preschool based in a village hall, only opening 4 mornings a week with 4 members of staff. We are ofsted registered

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I think it would make a difference to your insurance. Email them and ask. I think they would argue that they are employed. Especially if staff are not registered with the tax office. We have had to send them our employee reference number on renewals for the last few years.

 

Employees need to sign a contract.

 

Most pay monthly for hours worked or staff are salaried ie paid once a month 1 x 12th of annual salary.

 

Yours sound like most preschools.

 

It sounds as though you are half way there. It's not that bad once all up and running.

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You would still need to register as employed by committee/setting and do payroll, but doesn't sound like any paye would be due unless they have another job, but your psla insurance is 'employers liability', if they aren't employed by you they won't be covered or anyone else if they cause something to happen, if they are self employed they should have their own 'public liability' if something happened to a child say and they were culpable....you need to find out if they are or aren't, it's strange this hasn't been picked up before. Good luck

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I would venture to suggest that you are on very dodgy ground trying to class your "workers" as self employed - this guide will perhaps explain things more clearly and give you a better idea of whether you are flying by the seat of your pants or not - HMRC take a very dim view of "employers" trying to class their staff as self employed!

 

https://www.gov.uk/employment-status/overview

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Wow, I'm amazed your staff have stood for this for so long - if they even really realise what is happening! We are exactly like you - village preschool in a hall, 4 mornings, 6 staff in total and paying employees really isn't a problem, especially if you already have a treasurer doing some of the work!

 

I'd be VERY concerned about insurance - what you have now is not valid if one of them has/causes an accident as 'self-employed', so the sooner you make changes, the better :)

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you cannot call them employees if they are self employed.....therefore if you refer to employees in your policies then this information does not apply to these workers!!! (have you been inspected under these arrangements?) insurance and liability issues also

(have to say when I asked my husbands opinion on this question he went a bit mad.....his views are a bit spicy for this site....but safe to say he was NOT in favour of the way your committee are handling this at the moment! :o :blink: :wacko: :ph34r:

Do they invoice you with their hours each month then???

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Don't think I have explained things properly. Each month the manager does time sheets and passes them to treasurer, she then pays wages and writes up payslip. When workers start they sign a contract of employment, so they are employees.

The only reason I referred to them as self employed as we expect them to do their own tax return. As we pay under the tax bracket they would need to do this if staff have a second job. we pay holidays, statuary sick pay etc. I will now not refer to them as self employed- I have also made this point to staff so they fully understand they are employed by us. Thanks for all your input.

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Don't think I have explained things properly. Each month the manager does time sheets and passes them to treasurer, she then pays wages and writes up payslip. When workers start they sign a contract of employment, so they are employees.

The only reason I referred to them as self employed as we expect them to do their own tax return. As we pay under the tax bracket they would need to do this if staff have a second job. we pay holidays, statuary sick pay etc. I will now not refer to them as self employed- I have also made this point to staff so they fully understand they are employed by us. Thanks for all your input.

haha very easy online to take things one way when they are meant another...sound like you've answered the first question....as to the second there are lots of people on here who stipulate pay back for training....I am very against it and don't really feel it is truly legal so no I do not ask for payment back.

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Most has now been covered by the good people on here.

Expecting staff to sign/stay 2 years after training! Where did this figure come from? It is far too long imo and an unreasonable ask for someone only working 15 hrs a week!If you want good staff and good staff retention ,you need to support their professional development - part of EYFS too.

It is a problem for most of us as you are training staff who could then go on to leave but that's how it is and at least if you then cascade course info at staff meetings, everyone gets the benefit.

If you are talking about first aid (which is expensive) you could perhaps split the cost between staff member and setting or pay for so much of it but you would have to look at what you already have in contracts etc.

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I used to help run a small preschool and even if the staff were paid under the limits for tax and national insurance we still had to be registered with the tax office and submitted nil returns to them.. for us it was every 3 months..

 

It is not hard to to and you would need to contact HMRC - I don't think you can really expect to employ someone and then ask them to do their own Tax etc..with 4 staff it would take no time at all.

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I do the same as your manager Slip enders. I put in time sheets to our Treasurer and she does all the returns to hmrc. None of us meets the tax threshold but some do pay NI contributions. I have to admit that I do not know much about this part of the pre-school. We have been very lucky with our Treasurer for the past few years. Unlike in the past, but that's another story!

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I don't understand why your staff need to do tax returns (unless they are earning huge amounts and still claiming child benefit that is).

 

If they have more than one job they can contact HMRC and split their taxable allowance between employers or alternatively they allocate all of their allowance to one employer and pay tax on all their earnings with another employer - at the end of the tax year they can then claim any tax paid back

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