Employee or Sub-Contractor?

When deciding to take on a new member of your team it’s important to weigh up the options available to you. If choosing to take on a freelancer rather than employ then there are factors which you need to consider.

Will the sub-contractor be providing their services to you through a limited company, partnership or unincorporated association?

If the answer to this question is yes then you will need to investigate further to find out if the off-payroll working rules (IR35) apply. The IR35 rules ensure that workers who would have been an employee (if they were providing their services direct rather than via a third party) pay the same Income Tax and National Insurance contributions as an employee would. You can find out more here

Will the worker be a Director or such like ie board member, treasurer, trustee or company secretary? 

If the answer is yes to this then they must be employed.

The workers duties and how much control you have over what they do, what hours they work and where they work will significantly affect whether or not you should be employing the worker or if it’s acceptable to take them on as a freelancer. 

You also need to consider whether or not you would be happy if the sub-contractor used a substitute to do the work for you in their absence and how that substitute would be paid. 

We advise using HMRC’s ‘Check Employment Status for Tax’ (CEST) tool which asks you a series of questions that will determine the answer to whether or not you should be employing a member of staff rather than taking them on as a freelancer. HMRC say that by doing this it will cover you if someone were to query the arrangement you have in place. You will get an instant result once you have completed the questions and it gives you the opportunity to print off the results or save as a PDF for your records.

We wish you the best of luck growing your team! For more advice and tips join our Facebook Community Support groups…


“Any advice relating to accounts or tax should be sought from your tax accountant. Sage Accounts Solutions Limited will not be held responsible for any loss or damage caused as a result of the information contained herein.”

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