Summary of Threat
An employee only workforce is up to 40% more expensive than a mixture of both employed and self-employed tradesmen.
These costs come from holiday pay, pension contributions, lower productivity, and the administration of paternity/maternity pay, sick pay and HMRC reporting.
A fixed workforce deprives you of the ability to match your workforce to your order book.
Get the right advice & ensure you are protected
Speak To Colette
Specialist Construction Payroll Advisor
THREAT IN DETAIL
What happens if self-employed sub-contractors are reclassified as Employees?
If, as the result of either an HMRC status inspection, or Employment tribunal claim, a construction industry contractor has the use of its self-employed sub-contractors reclassified as employment, the contractor faces a number of significant challenges to the business.
The potential effects
If a contractors terms of engagement have been successfully challenged by HMRC, the contractor then faces bills for unpaid National insurance contributions, plus fines and interest on the unpaid taxes. HMRC can also levy fines of up to £3000 per monthly CIS return, because you incorrectly ticked the self-employed status declaration when your sub-contractors should have been employed.
Even if you could negotiate payment terms with HMRC that allowed you to continue trading, how can you then prevent the sub-contractors from lodging claims in the second strand of the courts for unpaid holiday pay, unpaid pension contributions, and (if you have let them go) unlawful dismissal?
Further still, the cost to a business for the future engagement of tradesmen as full-blown employees can be as much as an additional 40% on top of your current payroll burden.
What is the solution?
By appointing EEBS as the supplier of your sub-contract labour, you create an un-breachable Firewall that prevents HMRC from reclassifying your self-employed sub-contractors as employees. We have dozens of clients who have been inspected by HMRC whilst using our services, and our business model has never been challenged. EEBS will:
- Verify each sub-contractor with HMRC
- Calculate and pay CIS tax
- Inform the sub-contractor the amount that they will be paid
- Take full responsibility for all status submissions to the Revenue
- Provide both a payment statement (for each time the sub-contractor is paid) and an annual CIS deduction statement.
Furthermore, we have successfully defended many claims for holiday pay, and offer an unconditional guarantee that, if we were to lose a case, we would pay all of the associated costs.
How does it work?
EEBS engage the sub-contractors that you introduce to us, under terms individually tailored to ensure complete legal compliance for both you, and the sub-contractor. We then act as the contractor with full legal responsibility for those individuals, and any employment challenges that arise during the engagement.