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May 10th, 2024
By Faith McNamara

Should my domestic employee be classed as self-employed?

Are you preparing to hire domestic staff? Especially as a first-time employer, you should know the difference between employment statuses: employed and self-employed. These two classifications mean vastly different things for you as an employer. In this article, we will aim to walk you through all you need to know.

Usually, a salaried domestic worker's contract will have all the terms and conditions, such as hours, salary and duties. In contrast, the self-employed domestic worker can serve many clients and work when they decide and perform duties in their own way.

Here are some guidelines to differentiate between employment and self-employment:

An employed worker:

  • Works set hours
  • Must perform the work themselves
  • Can be directed on tasks and work conditions
  • Receives payment based on time worked
  • Can be paid overtime or bonuses

A self-employed worker:

  • Files their own taxes
  • Does not always have a contract
  • Has limited or no notice period
  • Works for multiple clients
  • Can provide their own equipment

Benefits of hiring private salaried workers

In comparison with hiring freelancers, domestic employees offer a lot of benefits. Firstly, many more candidates are looking for consistent salaried work meaning you have a bigger pool of possible employees to choose from.

Secondly, it allows for predictable employment costs, offering financial stability and foresight. Thirdly, there's the flexibility to adapt tasks according to evolving needs.

Additionally, written employment contracts offer assurance and clarity for both parties involved. The Little Ones Payroll Service can make sure all your financials match your contract for a smooth payroll experience. When being consistently supported both contractually and financially there's a potential for fostering greater loyalty and commitment from staff, which can significantly enhance productivity and satisfaction within the household or workplace.

Employers Liability Insurance

For household staff, being employed provides job security, financial stability, and access to employment rights such as holiday pay and sick leave. It also simplifies tax obligations and administrative tasks.

Self-employment in the domestic staffing industry often involves temporary positions or working with multiple households simultaneously. An employee can recommend a payroll service such as the Little Ones Payroll Service to centralise all their finances to make self-employment finances a bit more manageable.

To avoid legal repercussions, employers must verify the self-employment status of workers and obtain written confirmation from HMRC. The Little Ones Payroll Service offers support for domestic employers, ensuring compliance with legal obligations and handling administrative tasks.

Making sure your employee’s status is correct

The Check Employment Status for Tax tool is HMRC's assessment of a worker's employment status based on the details they provided. This tool is valuable for determining the employment status of individuals you engage or represent, as well as assessing whether the off-payroll working (IR35) rules apply to a contract.

It also helps to clarify whether HMRC considers you as employed or self-employed for tax and National Insurance contributions purposes. All deductions from an employee's payslip must be in line with their status.

Whilst the tool itself is not mandatory in making employment status decisions, it provides very useful insights. You can use these insights to guide your decisions and make sure that you comply with all observable regulations.

Figuring out whether your domestic employee should be considered self-employed or not requires a thorough examination of many factors. Consequently, it's vital to examine the type of their job setting, with an emphasis on their level of autonomy, the level of control over their tasks, and the extent of their working relationships with several clients.

Understanding the potential benefits and implications of both employment classifications is essential. By thoroughly evaluating these aspects with the help of experts from the Little Ones Payroll Service, you can make an informed decision that aligns with legal requirements and best serves the needs of both parties involved.

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