Engaging Individuals: Employed vs Self-Employed
18 February 2016
In 2014 the HR and Finance teams put together some guidance to help Schools/Institutes/ Departments determine the employment status of individuals prior to engaging them at QMUL to ensure that we were compliant with HMRC Employment Status regulations (i.e. is an individual to be engaged as employed or self-employed?).
Non-compliance with these legal requirements can result in QMUL incurring penalties from HMRC and/or being requested to pay the tax and National Insurance contributions for anyone who should have been classed as ‘employed’ rather than ‘self-employed’, which we may not be able to recover from the individual and therefore becomes an additional cost to QMUL. It is therefore important that anyone engaging an individual fully understands the process and procedures to follow.
It has become clear that we need to review our compliance by revisiting and clarifying our procedures for determining the employment status of anyone that we wish to pay for services who does not currently hold a contract of employment with QMUL.
We are therefore holding 3 workshops – one on each of the main campuses – to help provide colleagues with guidance and information on how to determine the employment status of an individual:
Tuesday 1 March – 2-4pm – Mile End – Biology Lecture Theatre, Fogg Building
Thursday 24 March – 2-4pm – Whitechapel – John Ellis Lecture Theatre, basement of Dental Hospital (enter hospital at ground floor level and use the nearby lift to go down to basement level)
Tuesday 5 April – 2-4pm – Charterhouse Square – Rotblat Lecture Theatre, Joseph Rotblat Building
You can book yourself on to any of the above workshops using the CAPD booking system (Code HR021)
Below is some basic guidance relating to determining an employment status, full guidance is on the HR website.
As a general rule it is expected that the majority of individuals will not satisfy HMRC rules for self-employment and any payments would therefore be processed via Human Resources either as a specific type of one-off payment or on a specific type of employment contract.
It is therefore imperative that the employment status for an individual is determined before any agreement is reached with the individual as to how they will be engaged by QMUL and certainly before the individual carries out any work for QMUL. If it is indicated that they may be self-employed then the supplier set up process for establishing a supplier on Agresso must be followed and completed before any engagement or commitment is made. The engagement will then take the form of a contract for services and reference should be made to the procurement website.
Whether someone is employed or self-employed depends completely upon the terms and conditions of the specific engagement with QMUL.
It is the responsibility of QMUL - and therefore the Schools/Institutes/Departments - to correctly determine an individual’s employment status in relation to the nature of the work which is going to be carried out for QMUL.
In order to determine an individual’s employment status, please visit the Employed vs Self-Employed section of the HR website for comprehensive guidance on what steps you need to take. Here you will have access to an interactive assessment tool that will allow you determine an individual’s employment status. Depending on the scenario the assessment tool may direct you to the HMRC’s Employment Status Indicator (ESI) – this will determine, for a particular engagement, whether the individual are considered to be an employee and therefore must be paid via the HR Department or whether the person can be treated as self-employed and paid via the Finance Department.
It should be noted that being in possession of a HMRC Unique Tax Reference (UTR) has no bearing on QMUL’s determining of an employment status. A UTR is not evidence of being self-employed in relation to the work being carried out for QMUL.
In the majority of cases individuals are likely to be determined as employed.
If the School/Institute/Department determine the employment status as ‘employed’ (as defined by the HMRC guidance) then the individual must be engaged either on a specific type of one-off payment or on a specific type of employment contract. The individual will then be paid through the QMUL payroll, where the appropriate amount of tax and National Insurance will be deducted at source. Information about which type of one-off payment or which contract should be used can also be found on the HR website.
There may be a very limited number of individuals who will be determined as self-employed.
If the School/Institute/Department determine the employment status as ‘self-employed’ (as defined by the HMRC guidance) and evidenced by a completed “ESI” then the following steps should be taken:
1. The individual will need to be set up by Finance as a supplier on the supplier database following the procurement process. Copies of insurance documents will be required in addition to an accurately completed ESI form and a note summarising the nature of the service potentially being supplied.
2. Once the formal supplier set up has been completed with inclusion on the supplier database Finance will notify the department.
3. Following this notification from Finance the individual must be engaged via a ‘Self-Employed Service Provider’ contract which must be completed by the employing School/Institute/Department.
4. The contract should be in place and signed in accordance with the scheme of delegation of Financial Authority, with the supplier confirmed as having been added to the supplier database, before any work is undertaken.
5. A copy of this contract should be submitted to procurement to be added to the supplier records on the supplier database.
6. An Agresso purchase order can then be issued before work commences. Our standard supplier terms and conditions are for payment to suppliers within 30 days of the date of the invoice. More information can be found on the Finance website.
7. For each activity undertaken a new ESI and contract is required to demonstrate that this continues to be an appropriate method of payment rather than employment.
Any previous ‘invoice templates’ that may have been provided to self-employed individuals by Schools/Institutes/Departments cannot be submitted. Any individual who has been determined as having self-employed status must submit valid invoices directly to the Finance Department for processing quoting the Agresso purchase order number Information about valid invoices and what they must include can be found here.