Engaging a Self Employed Worker

When engaging a contractor, self-employed worker or consultant it is important to follow the appropriate procurement route. The successful bidder for a contract may be a company or they may be an individual who is a self-employed worker. This guidance distinguishes the circumstances in which a self-employed worker may be engaged:

  • The first are individuals contracted by the Council via their own company or an organisation as a whole, who undertake work for the Council on a particular project and who also work for other clients/customers. These would be deemed as a ‘traditional’ self-employed worker.
  • The second are individuals currently employed by the Council who undertake additional work (not related to their day job), who invoice the Council via their own private company for the service provided.

It is Council policy not to engage a self-employed worker to fill a substantive post, in circumstances where the post holder would, in ordinary circumstances, be an employee paid via PAYE, but instead where the worker has arrangements in place to be paid via a private company.

In all situations, self-employed workers must be procured correctly and the process used will depend on the value of the contract.

In all circumstances where a self-employed worker arrangement is considered necessary such arrangements must be discussed and agreed with the Director of the department and the “Engaging a Consultant or Self-Employed Worker Form” completed and authorised.

When to use a Self Employed worker

Selfemployed workers may be used for:

  • Work with a definite start and finish or an end product such as a report or survey
  • Work that requires specialist knowledge or skills
  • Where work could not be undertaken by an employee because of the nature of the work

When to use an Office Holder

If there is a statutory requirement to appoint an individual for an independent piece of work, please see Office Holder guidance

Principles of Self Employed Status

In order to establish that a worker is truly self-employed it is necessary to determine whether the person works under a contract of service (employee) or under a contract for services (self-employed, independent contractor). For tax and NICs purposes, there is no statutory definition of a contract of service or of a contract for services. What the parties call their relationship, or what they consider it to be, is not conclusive. It is the reality of the relationship that matters.

In order to determine the nature of a contract, it is necessary to apply common law principles. The courts have, over the years, laid down some factors and tests that are relevant, which is included in the overview below.

There is no single question which can be asked to determine whether an individual is employed or self-employed. Each contract must be treated separately. As a general guide as to whether a worker is an employee or self-employed; if the answer is 'Yes' to all of the following questions, then the worker is most likely an employee:

  • Do they have to do the work themselves? A self-employed worker may be able to delegate work or send a substitution. An employee would not be able to do this.
  • Can someone tell them at any time what to do, where to carry out the work or when and how to do it? A self-employed Worker, will be given a brief or specification which includes the above, but where the work they do is controlled, directed or supervised on a regular basis they could be considered to be an employee.
  • Can they work a set amount of hours? A self-employed worker would manage their own time in order to complete the task. An employee would be required to work a set amount of contracted hours per week.
  • Can someone move them from task to task? A self-employed worker would manage their own project plan, an employee would be more closely supervised and allocated work dependent on priority.
  • Are they paid by the hour, week, or month? An employee would be paid a set hourly, weekly or monthly wage regardless of the work undertaken. A self-employed workers rate of pay may vary dependent upon the level of services provided.
  • Can they get overtime pay or bonus payment? A self-employed worker will not receive overtime payments or a bonus.

If the answer is 'Yes' to all of the following questions, it will usually mean that the worker is self-employed:

  • Can they hire someone to do the work or engage helpers at their own expense?
  • Do they risk their own money?
  • Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
  • Do they agree to do a job for a fixed price within set time frame?
  • Can they decide what work to do, how and when to do the work and where to provide the services?
  • Do they regularly work for a number of different clients or customers other than for HCC?
  • Do they have to correct unsatisfactory work in their own time and at their own expense?

Tax & Pension Implications

An employee’s status will determine their rights under employment legislation, the terms and conditions under which they are paid by the Council and their Tax, Nl and Pension responsibilities.

Self-employed individuals are responsible for calculating and paying their own tax and NICs on any payments the council make to them.

Only genuinely self-employed individuals are exempt from the Automatic Enrolment Regulations which require employers to enrol their staff into a qualifying workplace pension scheme. Failure to comply with this legislation could lead to a fine on the County Council that is based on the size of its workforce.

IMPORTANT:

It is the Council’s responsibility to correctly determine the employment status of its workers. If HCC do not make the correct employment status decision, the liabilities for PAYE and NIC will fall on the Council along with daily interest charges on any unpaid amounts.

Please see section 6.2 on the HMRC Employment Status Indicator (ESI) online tool. When making a decision on employment status, this tool should be used in all cases and a copy of the outcome must be retained for audit purposes.

Furthermore, the status must be reviewed and re tested for any self-employed worker who is employed for more than one year.

How to Appoint a Self-employed Worker

The Council’s Contract Regulations apply to all contracts let on behalf of the Council except contracts for any interest in land or contracts of employment.

Full guidance and template documents are available in Quotation Guidance

For contracts with a total estimated contract value over £100k you will need to use the Tender procedure, please contact the Strategic Procurement Group for advice and template documents.

1. Obtain Authorisation to engage self-employed worker

Authorisation must be obtained from the Director of the department. The Engaging aConsultant or Self-Employed Worker Form(Part 1) must be completed and signed.

2.Check and enter the contract on the contract register

The Contract Register should be checked to see whether the Council already has a contract for the same service. If a new contract is required, the details of the contract should be entered onto the contract register. The contract reference number should be quoted on all documentation.

3. Determining procurement process to follow

Please refer to the procurementQuotation Guidanceand follow the necessary steps of the procurement process.

4. Evidence of Self Employed Status

Before awarding a contract, you should ensure Self Employed Status is verifiedusing the Employment Status Indicator (ESI). This is an online interactive tool that determines the working relationship between an organisation and a worker. It is the quickest way of getting HMRC's view on whether a worker is employed or self-employed. The information you provide should accurately reflect the working arrangements of the contract and how the work is carried out in practice.

Use the Employment Status Indicator

You can rely on the ESI outcome as evidence of a worker's status for tax/NICs/VAT purposes if both of the following apply:

  • your answers to the ESI questions accurately reflect the terms and conditions under which the worker provides their services
  • the ESI has been completed by the manager, head teacher or their authorised representative

It is essential that the Summary of Outcome screen bearing the 14 digit ESI reference number is printed or saved from the ESI tool. If the worker’s employment status is questioned in the future, HMRC will only be bound by the ESI outcome if this document can be produced. The ESI number must also be entered onto the Vendor Request form before it is returned to Serco Accounts Payable.

5. Set up Vendor

If the self-employed worker has never done business with the Council before, then Serco Accounts Payable will need to set up a Vendor Account. The Contracting Officer should complete a Vendor Request form under the Z015 ‘Trade Code’ if not already listed.

6. Update Authorisation form

Complete Part 2 of the Engaging a Consultantor Self-Employed Worker Form with the details of the successful Appointee and return toHuman Resources Strategy, Policyand Reward Team:

7. Raising a Purchase Order in SAP

An On-Line Buyer will need to raise a Purchase Order to the appropriate Cost Code for the department and General Ledger code 436199 ‘Fees-Consultancy’. The Purchase Order should include the information as instructed in the Quotation Process to cross-reference the Quotation Document submitted by the worker.

Invoices that are subsequently received by Serco Accounts Payable will generate an email to seek approval from the appropriate authoriser for the invoice to be paid.

Further information and guidance documentation is available in the Quotation Guidance on Compass.

8.Complete Contract Documentation and Update Contract Register

The contract needs to be finalised and signed by both parties and the Contract Register should be updated to include details of the successful worker.The Engaging a Consultantor Self-Employed Worker Form should be saved on the Contract Register.


Engaging a Consultant or Self-Employed Worker form

Part One

Project / Contract Title: INSERT DETAILS

(Description of procurement)

Justification:

(Description of why the use of a Consultant or self-employed worker is required)

Location: INSERT LOCATION

(Site or where Contract will take place)

Estimated Contract Start Date INSERT DATE

Estimated Contract End Date INSERT DATE

Estimated Contract Value: £INSERT VALUE

Procurement process:

For Procurements with an Estimated Value of below £100k please refer to the Quotation Guidance If the estimated value is above £100k speak to SPG

Contracting OfficerINSERT NAME

(Has responsibility for the contract and tendering process)

Contract ManagerINSERT NAME

(Has responsibly for the Contract and therefore any resultant self-employed worker once appointed)

Contract Authorised Officer INSERT NAME

(Is the Senior officer who has responsibly for the Contract throughout its life)

Authorisation
Requested by
Contracting Officer / Print Name
@hertfordshire.gov.uk / Contact telephone number
Signature: / Date
Approved by
Contract Authorised Officer / Name
@hertfordshire.gov.uk / Contact telephone number
Signature: / Date

This form should be held by the Contracting Officer until the procurement process has been undertaken. Once an appointment has been made, Part Two of this form should be completed.

Engaging a Consultant or Self-Employed Worker form

Part Two

Complete this form following the consultancy contract evaluation of submissions and decision on winning bidder.

HCC Contract Reference Number:INSERT DETAILS

Contract Start Date INSERT DATE

Contract End Date INSERT DATE

Contract Value: £INSERT VALUE

Is the recommended worker self-employed Yes/No

If NOthen in addition to completing the information above,detail the name of the company appointed to provide the Contract below and file this form with the Contract for any future reference.

INSERT NAME DETAILS ______

If Yes

Self-employed worker Appointed: INSERT NAME DETAILS

Confirmation ESI has been completed and retained:YES [ ]

The ESI can be found on the HRMC Website

HMRC recommend you should download and print or save the PDF bearing the 14 digit ESI reference number from the summary of outcome screen. If the worker’s employment status is questioned in the future, HMRC will only be bound by the ESI outcome if this document can be produced.

ESI reference number (14 digit number)NUMBER: [ ]

A copy of this form should be held on file by the Contracting Officer in case of audit.

Once Part two of this form is completedif you are appointing a self-employed worker then a copy should be forwarded to the HR Strategy, Policy and Reward team at;