What is the difference between employing your household staff and taking on a self-employed worker? We cover our frequently asked questions on self employment vs employment in the domestic staffing industry.
What is the difference between employment and self-employment?
An employed domestic worker generally works for one household, under a contract of employment outlining their hours of work, salary and expected duties.
In contrast, a self-employed domestic worker provides their services to multiple clients, choosing their own working hours and deciding how and when to carry out the work they are undertaking.
Here are some general rules on employment vs self-employment:
A worker is considered employed if they:
• Work a set number of hours
• Must undertake the work themselves
• Can be told at any time what to do, where to carry out the work or when and how to do it
• Can be moved from task to task
• Are paid by the hour, week, or month
• Can be paid overtime or receive bonus payments
A worker is considered self-employed if they:
• Can choose their own hours
• Can send someone in their place to undertake the work or engage helpers at their own expense
• Can decide what work to do, how and when to do the work and where to provide the services
• Regularly work for several clients
• Provide the main items of equipment needed to do their job
• Agree to do a job for a fixed price regardless of how long the job may take
• Must correct unsatisfactory work in their own time and at their own expense
What are the potential benefits of employing your household staff?
When you employ your staff you may experience the following benefits in comparison to taking on a self-employed worker:
• When you employ, you can use a domestic recruitment agency to find and interview a pool of candidates in the role you are recruiting for. This gives you more opportunity to find the ideal person for the job based on your preference in skills, style of work and experience.
• You can budget your employment costs in advance – however with a self-employed worker, it’s more challenging to pre-plan how much pay is required.
• You have more flexibility and versatility as you can switch up your employee’s tasks as and when your needs change, whereas someone who is self-employed will choose how and when to carry out their work.
• Having a contract of employment in place provides assurance that the terms of the employment have been agreed in writing. If something goes against the contract terms, you can terminate the employment which can be harder to manage with a self-employed individual. For example, if they are a contractor, they may even be able to terminate the work without your say.
• When a worker is dedicated to one employer they may have a greater sense of loyalty and commitment to you. A self-employed worker who has multiple clients may be less likely to have the same capacity to meet your requirements.
• You can be covered for workplace injuries under Employers Liability Insurance – unless self-employed or contract workers buy their own insurance, they can sue the employer for damages when injured on the job.
When you employ your domestic staff you have the opportunity to interview a pool of candidates in order to find the best person for the job. You can also budget for your employment costs in advance which is harder when taking on a self-employed worker.
What are the benefits of being employed as a household staff member?
When you are employed you have more job security, financial certainty and access to employment rights:
• You have more financial certainty; a source of guaranteed income and a set pay day to better manage your outgoings.
• From a legal standpoint, you have access to employment rights such as holiday pay, sick pay and maternity leave. This means you will be entitled to pay in the event you are on holiday, off sick or if you are pregnant.
• You have set working hours which often makes for better work life balance when planning and committing to events in your personal life. Additionally, a self-employed worker must correct unsatisfactory work in their own time and at their own expense.
• If you are self-employed you will need to register with HMRC, file your own tax returns, record financial transactions, creating invoices and purchase receipts which creates time-consuming admin.
Under what circumstances is a household staff member self-employed?
The most common example of self-employment in the domestic staffing industry would be if the person has a series of temporary positions or works with three or more households at one time.
Checking your staff's employment status
If you take on a self-employed worker without carrying out the correct checks to confirm their self-employment status, and it later comes to light that they have not been granted this status, you as the employer could face serious repercussions such as liability for all unpaid tax.
When you agree for the worker to take on the job, you will be responsible for requesting written confirmation of their self-employed status from HMRC.
How can Stafftax help?
Becoming a domestic employer
Worried about your legal obligations as an employer such as how to pay your staff and declare taxes? That’s where we come in. Once you have found your household staff we can support you with all your legal obligations as a domestic employer. From payslips and contracts to HR support and pensions management, our expert teams will handle all the time-consuming admin whilst ensuring you are complying with the latest HMRC legislation.
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