Security guard: employed or self-employed?

[Alastrum]

Posting on behalf of a friend:

 

A friend of mine works as a part-time security guard. He does 3 shifts, of 12 hours each, at the private residence of a very wealthy family. His contract is not with the family directly, but a security firm employed by the family. The residence is guarded 24/7 by a number of guards. Each guard chooses how many shifts a week they want to do, and enters their name in the upcoming months roster. Most guards do the same number of shifts, on the same days every month, with the occasional swapping around if someone doesn't feel like working a particular shift. Some guys do 2, some 3, some 4 or more shifts a week according to their own choice.

 

Technically, they are self-employed: the security firm insisted they sign a declaration to that effect, and each guard is responsible for his own tax and NI.

 

However, in practice, the working conditions are more like those of an employee rather than a contracted self-employed person. Indeed, according to the HMRC's own guidelines, they would be classed as employed if not for the fact the security firm says they're not. The lines are very blurred, and it seems that it's mostly because the security firm wants the control they'd have over employees without having to pay tax, NI, sick or holiday pay etc.

 

Up to now, most guards have accepted this. However the firm has recently announced that all guards must work a minimum number of 4 shifts a week. This causes a lot of problems for many guards there: some are, like my friend, engaged in their own business start-ups, and are just working part-time while their other work gets up and running. They don't want to be forced to work more shifts. Others, who work 5 or more shifts a week, don't want some of their shifts taken away and given to other people.

 

Bizarrely, it seems from anecdotal evidence, that the only reason for this proposal is because the boss of the security firm is fed up of signing so many pay cheques every week!

 

So, my friend wants to know where he stands: he's already aware that 90% of his job seems to blur his status between employed/self-employed, but can his "client" dictate how many hours he works, without fully crossing the line into being an employer?

Edited May 20, 2012 by Alastrum

[millitant]

interesting

 

the difference between self employed and employed is a contract of employment and how you are paid.

 

if you receive a wage slip with deductions then you will be an employee, not self employed

 

to change the hours he needs to do an informal consultation on the effects of the change as family friendly hours and flexable working needs are addressed as to the employment rights act.

 

but as stated it is blurred due to self employed status

 

i would get together with the other guards, state it is unexceptable, try to work out a compromise, and vote with your feet if needs be

 

i very much doubt a private security firm can afford to lose one member of staff, let alone a collective

 

but thats me, i would not be bullied by anyone

 

but it is you alone who can make that decision

[Crocdoc]

The following may help

the purpose and intention of the parties - this factor looks at the purpose of the contract and what the employer and the employee intended when they made it. It does not matter how they have described it, so that it is not the case that a worker is self-employed just because that is what the employer says s/he is, or even because s/he is paying tax as a self-employed person

method of pay - if a business has paid a worker regular payments of the same amount for some time, this may indicate that s/he is an employee rather than self-employed, even if the employer gives the pay some other name, for example, an honorarium. This would be particularly true if the pay was agreed each year and the worker received pay increases at regular intervals. Self-employe

whether the worker works only for that organisation - this factor measures how independent the worker is of the employer's organisation and whether s/he works only for that organisation or is able to choose to work for other organisations as well. If the worker works exclusively for one organisation, this would be an indication that s/he is an employee

work performed at employer's premises - if the worker is based at her/his own premises and only moves to other premises to do particular jobs, s/he is likely to be self-employed, although home working is becoming more common now for employees. If s/he works at the same employer's premises all the time, s/he is more likely to be an employee

[millitant]

another question to decide this issue

 

does the security company provide holiday/sick pay etc

[Crocdoc]

another question to decide this issue

 

does the security company provide holiday/sick pay etc

 

From the initial post it would appear not, in my view this is the reason for insisting on self employed status. I would however suggest that this arrangement is highly questionable . A call to ACAS may help to clarify the position.

[Gbarbm]

Hi

Use the ESI (employment status indicator) on HMRC website this will provide an opinion on employment status.

[Bang!]

the 'self employed' status sounds like an attempt to lessen the security company's responsbilities to their employees.

 

The IR guidelines covering contracting should show this to be nothing other than employment.

 

Once showing that, there is holiday/sick pay due, although I am unsure on what becomes with already paid tax and NI.

[stu007]

Hi

 

Have you either signed a Disclaimer or any Terms & Conditions with the Security Company? (if so what are these?)

 

or

 

Is there a Contract for Services?

[Alastrum]

Hi, thanks for all your responses. I've put your points to my friend, and it's absolutely clear that in almost every single instance they are really employees: they're paid weekly, they work on site, there's no substitutions allowed, the hours and duties are set by the security firm etc etc.

 

Obviously, I don't work there, and don't know the setup exactly, but it actually looks to me like a very dodgy operation, and I'm beginning to suspect that the security firm would most definitely not welcome any investigation by the HMRC! I think "bang!" has hit the nail on the head when he says that it looks like an attempt by the firm to lessen their (financial) responsibility.

 

Having talked this over with my friend, he says that the issue is clouded further by the fact that the end client, the family they all ultimately work for, has diplomatic status (no, I don't know who they are: he's unable to tell me!). This makes it unclear (at least to me) whether UK law and employment regulations would even apply here.

 

In addition, it would seem that one or two (possibly more) of the guys who work there may not actually be declaring the fact, and it is simply a second job for some extra cash. (I'm not judging: people do what they need to, to survive).

 

So, taking all that into account, I'm guessing that both sides would be rather reluctant to have any legal investigation take place that may bring the attention of HMRC towards them! This is then, in effect, a stalemate, as both sides can use the threat of investigation against the other. Regardless of their legal status, the guards can't force the boss to comply with the law, because some of them will either have to leave or start paying taxes if they are forced to go 'legit'. And the boss can't force the guards to work a set period, as he would then have to admit their status as employees and pay holiday/sick money etc. and this would probably have to be backdated too. On top of that, he would have to face losing some trained and experienced people and have to recruit others.

 

So unless any new development takes place, I'm guessing that the situation will continue unchanged, and both sides will just have to accept things the way they currently are.

 

Thanks once again: I'm sure the guys feel a bit happier knowing that, even if their status remains unresolved, they can't just be walked over!

[Gbarbm]

Your friend can contact the status inspector at HMRC who would then undertake an enquiry to establish the correct status.

Presumably,at the moment, the security guards are paying Class 2/Class 4 nic and are declaring their income on the self employed page of their self assessment return.

If there is an employer presence in the UK then there will be an obligation on that employer to pay tax/NI. An employer presence could be as simple as a UK accountant dealing with matters.

The main issue for the security guards is the loss of "contributory principle" by that I mean that if they are not having the Class 1 (employment related) NI paid for them by the employer, this will have an impact on contribution based benefits in the future as there may be insufficient Class 1 contributions paid and they will not be entitled to full state pension etc

[becky2585]

I would add from my experience with this industry that your friend may actually be a "worker". Usually security guards are on a zero hours contract, which often takes away some of the employment rights they would hold as an employee.

[Bang!]

I would have to doubt there is a problem for the workers reporting their status from a legal perspective (other than if claiming benefits). The nationality/legal status of the people whose home they are sent to is also irrelevant.

 

They are workers, its not their duty to pay the NI or tax, and although it might reflect unfavourably some not paying what their employer claims is due, they are employees, so its not their responsibility.

 

But I wonder how long the security company will continue to exist if hit with tax bills and holiday/sick pay claims. Its ceasing to trade is their main risk.

 

Has the security company limited liability?

[Gbarbm]

Just for clarification;

 

 

One of the deciding factors on the operation of PAYE is whether the employer who makes the payment on account of wages or salary has a tax presence in the UK. The decision in Oceanic 56 TC 183 makes it clear that there is a territorial limitation to PAYE which restricts it to cases where the employer has a ‘tax presence’ here.

For PAYE compliance purposes, it does not matter whether any corporation tax liability actually arises on the UK presence of the employer. It is sufficient that a tax presence exists.

HMRC regards a branch or agency in the UK, or a UK representative office, as establishing a tax presence.

However, we would not regard an overseas employer as having a tax presence in the UK simply because there are employees in the UK. For example, an overseas concern may employ sales staff in the UK who simply travel around from their private residences to seek orders. We would not say that there was an employer tax presence at the private address. An overseas employer may also use professional services in the UK, for example banking or legal services. Again, we would not say that this was a tax presence in the UK.

For there to be a tax presence, we need to show there is something in the UK similar to a branch or agency, office or establishment. Essentially, we need a UK address where we can contact the employer, send PAYE literature and, if necessary, enforce compliance.

Cases where doubt exists as to whether PAYE is appropriate should be referred to Personal Tax Product & Process, PAYE Technical, Shipley, for advice before it is agreed that Direct Collection procedures can be applied.

Once we can show a tax presence, we can look to that presence to operate PAYE even if payments to employees in the UK are not made from the UK. For example, even if the UK employees of a UK branch or agency are paid by a part of the organisation outside the UK, we would still require the branch to operate PAYE.

[stu007]

Hi

 

Great advice but we also need more info on anything he signed as in contract wise with this company as I asked in post #8

 

I do also think for the HMRC side we need the above info as to anything he signed.

[Bang!]

Just for clarification;

 

 

One of the deciding factors on the operation of PAYE is whether the employer who makes the payment on account of wages or salary has a tax presence in the UK. The decision in Oceanic 56 TC 183 makes it clear that there is a territorial limitation to PAYE which restricts it to cases where the employer has a ‘tax presence’ here.

For PAYE compliance purposes, it does not matter whether any corporation tax liability actually arises on the UK presence of the employer. It is sufficient that a tax presence exists.

HMRC regards a branch or agency in the UK, or a UK representative office, as establishing a tax presence.

However, we would not regard an overseas employer as having a tax presence in the UK simply because there are employees in the UK. For example, an overseas concern may employ sales staff in the UK who simply travel around from their private residences to seek orders. We would not say that there was an employer tax presence at the private address. An overseas employer may also use professional services in the UK, for example banking or legal services. Again, we would not say that this was a tax presence in the UK.

For there to be a tax presence, we need to show there is something in the UK similar to a branch or agency, office or establishment. Essentially, we need a UK address where we can contact the employer, send PAYE literature and, if necessary, enforce compliance.

Cases where doubt exists as to whether PAYE is appropriate should be referred to Personal Tax Product & Process, PAYE Technical, Shipley, for advice before it is agreed that Direct Collection procedures can be applied.

Once we can show a tax presence, we can look to that presence to operate PAYE even if payments to employees in the UK are not made from the UK. For example, even if the UK employees of a UK branch or agency are paid by a part of the organisation outside the UK, we would still require the branch to operate PAYE.

 

Eloquently put, however, its security guards, with their employment only being in the UK.

 

The security company is paid by/for the foreign family, and it would be the security company's relationship to those security guards that would be assessed. I feel suggesting there could be any application of the laws of agency to be unlikely.

 

Lastly, it's in HMR&C interest for the workers to be employees, and the likelihood of close to casual security guards ever reaching anywhere stating case law, is at best highly improbable.

[Gbarbm]

In his/her first post, it states " His contract is not with the family directly, but a security firm employed by the family."

This suggests to me that the security firm could be an agency in which case;

Subject to certain conditions, the agency legislation applies where a worker provides services to an 'employer' through a third party in such a way that, technically, the worker is not an employee of either. The third party will often be an employment agency but the legislation may apply to any worker who provides services through any third party. Before the legislation was introduced an agency worker who was not employed by either party was liable to Class 2 NICs and assessed under Schedule D.

Where Part 2 Chapter 7 applies, the services rendered by the worker are, for income tax purposes, treated as if they were the duties of an employment held by the worker. The remuneration receivable is treated as earnings and is therefore chargeable to tax under as employment income. Accordingly, all the employment income rules apply and PAYE must be operated by the payer.

Where Regulation 2 applies, the worker is treated as an employed earner for Class 1 NICs purposes. The agency is treated as the secondary contributor for Class 1 NICs purposes by virtue of Regulation 5 and paragraph 2 in column (B) of Schedule 3 to the ‘Cats Regs’.

 

All I'm saying is that further info is required as it is not as clear cut as it first appears