If you are starting a business or expanding, your first key decision is whether to hire employees or engage self-employed freelancers. The choice depends on various factors, and misclassification can lead to legal and financial risks.
Employment status – employee or contractor?
It may seem simpler to engage a freelancer, but if they work under your control, they may be legally classified as an employee—regardless of what the contract states. This can result in claims for unfair dismissal, unpaid holiday, or HMRC pursuing tax and National Insurance liabilities.
A self-employed person:
- Is their own boss, setting their rates and work schedule.
- Has the discretion to send someone else to complete the work.
- Is not under day-to-day employer control.
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An employee:
- Is committed to working for you.
- Works under your direction.
- Must complete the work personally.
Even if someone is not an employee, they may have “worker” status, which still grants them certain rights. Courts, tribunals, and HMRC assess the actual working relationship, not just the contract wording.
Steps to becoming an employer
Before hiring:
- Define the role and salary, factoring in tax, National Insurance, pensions, and benefits.
- Consider available funding options, such as apprenticeships.
- Check if a Disclosure and Barring Service (DBS) check is required.
Before they start:
- Register with HMRC for PAYE and set up payroll.
- Arrange employer’s liability insurance and pension auto-enrolment.
- Ensure workplace health & safety compliance, including remote work setups.
- Conduct right-to-work checks to avoid fines.
Legal documents
Employment contracts must be provided by the first day of work. Policies on grievances and discipline are legally required, and regular updates ensure compliance with changing laws.
How we can help
We assist businesses in setting up employment structures, drafting contracts, and ensuring compliance.
Contact Jessica Gowar at Ware & Kay for expert advice: York 01904 716000, Wetherby 01937 583210, Malton 01653 692247.
