One of the big auto-enrolment issues for employers is deciding who it is that works for them (and who is just an occasional contractor). The issue is generally put in the too-hard box – a dangerous thing to do in an age of class-actions.
There may be a large number of workers that have a case for a personal contribution from you – the employer – who you have quite ignored (as eligible jobholders for a workplace pension contribution).
So far, the only guidance we’ve been getting from the Pensions Regulator is the “is he looks, smells and acts like a worker, he’s a worker” line. Which is hardly the most scientific of tests.
Help on its way?
But now HMRC has given those employers in the public sector some help in determining who they should be employing and who they simply contract services from. This is a part of a move from April 2017 to be clearer on the issue.
HMRC have issues a link to a modeller which allows you to test a contractor to see if he/she should actually be treated as an employee. Here’s the link
I have written to the Pensions Regulator asking whether this bit of kit might be used (or adapted) to allow us to tell our contractors from our workers for auto-enrolment purposes.
In the meantime, I’d be interested in feedback from payroll professionals and legal experts as to their thoughts on the suitability of the “check for employment” modeller.
HMRC issue the usual warning that they will stand by the modeller’s results but may insist that an audit of the answers given be conducted to ensure that “crap-in ; crap-out” doesn’t apply.
Check employment status for tax
For those interested in the new service, here are some useful details (thanks to CIPP); https://www.cipp.org.uk/news-publications/news/new-employment-status-service-now-live.html
The new Employment Status Service enables you to check employment status for tax purposes and has replaced the Employment Status Indicator.
This is to be used to find out if you, or a worker on a specific engagement, should be classed as employed or self-employed for tax purposes.
This service will give you the view of HMRC on whether:
- the intermediaries legislation (known as IR35) applies to an engagement
- a worker should pay tax through PAYE for an engagement.
HMRC will stand by the result given unless a compliance check finds the information provided isn’t accurate.
This service can be used for current or future engagements in the private or public sector. You should reassess the status of the role if there are changes to the engagement or the way the work is done.
This service is anonymous and won’t store any information you enter or the result given. You’ll be able to print your result for your own records.
Follow this link for full details and access to the Check employment status for tax tool.