Tag Archives: Business

Getting to grips with ‘the help’

The natural growth pattern for a start up business is to have one or two unpaid owners who start it, then they get paid (a bit), and then other people start helping in the business.

Family members help out from time to time, some casual workers, some freelancers, even interns and apprentices. Some businesses never get out of the ‘freelance’ mode and take on employed staff.  Some employ people and carry on with a mix.  Very few end up with employed staff only as a business model.

Entrepreneurs cite fear of employment law as one of their key concerns – yet few seem to realise some simple facts:

  1. Calling someone freelance or self employed does not mean they are (we might have thought of that one ourselves if it really worked!)
  2. Self employment does not mean no tax has to be deducted under IR35
  3. Employment tribunals can decide your people are really employed (and trigger claims from the revenue for back tax)
  4. Genuine freelance workers have a full range of discrimination and other employment rights (the main thing they don’t have is unfair dismissal rights)

It can be tempting to take on people as freelance workers and not have to worry about PAYE and tax at the end of the month, but it can mean that you are storing up trouble for the future.   Sometimes it can be better to pay the tax as you go and know you don’t owe the revenue anything later.

New employees have two years before they qualify for unfair dismissal rights, and for some people it can be less worry to take on staff if the work needs to be done regularly or on an ongoing basis.  You really should talk to your accountants about this and tell them honestly how you are working.

Even if freelance workers are the right model for you, you need a proper agreement that not only sets out the relationship so HMRC can see it is not an employment relationship but also deals with:

  1. Who owns copyright – the default is that they will if they are not an employee
  2. Confidentiality and data protection
  3. What happens about confidential information when the contract ends
  4. How they will deal with sending suitably qualified substitutes when they are not available……because if they can’t that may be one indicator that they are not self employed
  5. What equipment they are going to provide
    And there’s more……

There are lots of things the law gives you automatically if you are the boss of an employee that you are going to have to contract for if you are using freelance workers. We come across people who don’t have copyright in their own web sites, who don’t have access to social media followers they paid someone to find and worse.

Ultimately you are in business to get particular things done at a profit. Setting out proper arrangements to manage freelance workers (and staff) are part of the building blocks of that success. Join us for a free teleseminar to discuss managing freelance workers – register via this link.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.

Tel: 08452 303050 Fax: 08452 303060
You can follow Annabel on Twitter
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com

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Filed under employment law, Freelance Workers

Guest blog – Does HMRC understand IR35? Do you? Does anyone?

This is the transcript of an interview between Robert Bradley of Bradley & Associates and Annabel Kaye of Irenicon. Robert’s firm is accredited by the Professional Contractors Group, and he regularly speaks on the subject of Tax Status and IR35.

Annabel:  One of things we find when working with entrepreneurs is that they think if someone is self employed they should pay their own tax and national insurance and that should be an end of it. The situation is more complicated than that since calling everyone self employed doesn’t mean they are and even if they are HMRC can make you deduct tax or charge you if you haven’t. The whole tax thing is about as clear as mud to most people. HMRC have recently updated their tests and guidance and I have asked Robert Bradley to try to help me understand who has to deduct tax and when.

Robert:  HMRC has struggled with enforcing clear rules around tax status, particularly in the construction industry and in the case of the one man consultant contractor who is potentially subject to the Intermediaries legislation, more commonly known as IR35. The latest new ‘Business Entity’ tests which have been introduced under IR35are an attempt to help businesses understand when they should be deducting tax from freelancers and when they shouldn’t. Whether this will really help in this process remains to be seen. To date they have not been well received.

Annabel:  I have been through the tests on the website with several clients to see what answers they get. While some are getting very clear indicators that they should be deducting tax under IR35, a lot are getting results in the ‘grey’ zone. If someone uses the tests and puts in honest data, are they in the clear if the tests say – don’t deduct tax?

Robert:  Well, as a specialist in this area, I think they have missed an opportunity to use existing cases and make them part of the online tests so that people can be fairly certain where they are if their situation matches one of the key cases. There is also no real understanding of how small businesses and start ups really work, so a lot of genuine one person businesses may come out of the tests as ‘not a business’ because they don’t need indemnity insurance, can’t create efficiencies internally, and don’t need to advertise or operate from premises. In the world of social media you may not have any paid advertising receipts and yet have a very successful business. Lots of real businesses are start up and run from home and the tests put too much emphasis on where people work, which in the modern online and virtual world is increasingly irrelevant.

Annabel:  We have seen a few new clients who have come to us when HMRC are saying these people are really employees. The problem is that at that point there is often a disputed liability for back tax – either under PAYE or IR35. Do you see these new tests as helping people avoid that problem?

Robert:  While I do see that we need to guard against abuses like having a job, leaving it, forming a personal services company and going back into that same job with a different tax structure, I think there are real problems with some of the other tests. For example how can someone provide substitutes if their skills are very specific?

Annabel:  We have looked at that element. The reality is with the right framework agreement that enables a substitute to be used (with the client’s consent) it is possible to get a substitute to do some of the work. It does not have to be all of it. For example, a high level IT specialist may still have some ‘hack’ work to do within a contract and can organise someone suitably qualified, with the client’s consent to do that. Sometimes that can be really good for the business and can lead to a serious look at whether the boss ought to be doing the grunt work – something that is often the turning point from ‘solopreneur’ to real entrepreneur with a team of associates and/or employees around them.

Robert:  I don’t think the new guidance will help many contractors have peace of mind about IR35.

HMRC are currently targeting IT contractors, so perhaps when a few cases have come to court and been settled we will have a clearer picture of how the new rules will determine the IR35 status of one man contractor companies. In the meantime, I will be updating my social media as updates are published.

Annabel:  We will continue to run our KoffeeKlatch seminars on managing freelance workers and to urge people to use a proper agreement and take proper advice on the tax status.

Thank you Robert, it’s clearly a very challenging area of taxation and I appreciate you taking time out to share your thoughts with us.

You can follow Robert Bradley on Twitter
He can be contacted by telephone on 01299 879140
Email : robert@bradleyandassocates.co.uk
Web : www.bradleyandassociates.co.uk

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.
Tel: 08452 303050 Fax: 08452 303060
You can follow Annabel on Twitter
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com

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Filed under employment law, Freelance Workers

The past is no guide to future performance

Mary is an established member of her team, with good social and professional relationships with her co-workers.  Her boss has managed the unit with a fair degree of success (neither perfect nor imperfect), and everyone knows where the boundaries are and what is expected of them.

Boss moves on with fond farewells.  New boss Sarah arrives, with her own way of doing things.  Mary feels put out by the changes, and wants to carry on working as before.    She complains to colleagues about the changes, and starts to campaign with them that they should not implement them.     She tells her colleagues that many of the changes are pointless and will not work, and she will not participate in them.   When a colleague tells her “Sarah’s the boss, why not just do what she says?”  Mary turns on her heel and laughs.  Although Mary is a valued member of the team, her campaigning is making life very difficult for her new boss.  The team is dividing into ‘pro Sarah’ and ‘pro Mary’ camps.  Mary talks about “I was here first”, and “it worked well before”

Sarah was a very popular boss with her old team, and she is well liked by some of the new team.  She is very approachable, regularly buys drinks for everyone in the pub, and is willing to bend the rules to help her team members, letting them go home early if needed.    Standards are slipping a bit – the old boss was a stickler for detail, whereas Sarah is more of an overview person.   No-one from outside would notice the difference, but old team members shrug their shoulders and pick up the slack.  Sarah doesn’t seem to know.

Why is it we are so bad at change?

Planning for change, or accepting changes that are not planned, is something few us are willing or able to do.

Sarah went into a new team without a clear plan for how she would evaluate whether change was needed, communicate that change, implement it, and monitor it.  She just did what worked well in her old team.

Mary did not expect any change except for the name of her boss.   When faced with change she resisted it all.

If the team is lucky there will be a natural mediator on the team – one of those wonderful people who are the glue that really make the workplace work.    We need someone to say to Mary: “The boss is the boss.  Unless it is dangerous, or illegal, it is her job to say what we do.  If you think it is inefficient or there are better ways, have a quiet word with her and let her know, otherwise you need to do it.”   And we need someone to feedback to Sarah that she is changing how things are done (she may not be aware of it), and that she needs a process for bringing people along with her and for dealing with Mary.

How many HR specialists does it take to change a light bulb?

That depends on whether you want to keep the light bulb.

Sarah could have a useful learning experience that will enhance her skills and make her next promotion easier, or she could struggle with Mary and slowly begin to fail – she could get stuck here.  Mary may even accuse her of bullying, as Sarah repeats the same instructions over and over again and Mary gets progressively more isolated from her team.

Mary can learn how to handle change and difficult situations.  Or she can campaign against her boss, and sooner or later she will find herself with no promotion prospects, and quite possibly no job.   Mary can feel bitter that her lovely job was ‘stolen’ from her by this awful manager – an attitude that may affect her life at home as well as at work.

It’s not a big deal to help new managers put together a system of ‘raising the bar’ so that they can change the way a team works.   It’s not such a big deal to help Mary (at an early stage) to work out the difference between changes she needs to give feedback on, and those that are not really something to worry about.

So where were HR when all this was happening?   They were busy with other important things.  They had not routinely touched base to see how this team functioned.  Of course, when Mary claimed she was being bullied, and Sarah claimed she was totally unsupported by management, HR were all over the investigations like a rash.  The hours of note taking and decision making meant they were then too busy to touch base with any of their other teams.

Is there a happy ending to this tale?  Not really:  Mary spent years resenting Sarah, and then transferred to another team.  She is not regarded as a popular or successful team member, because she has kept up the habit of complaining about the boss and resisting all change.  Sarah never got another promotion in the organisation.  She stayed in post for a few years and then got a job outside.  She started with her new team in the same way, and is now convinced that people are just awkward and you have to push them harder to get what you want.   HR are still doing a lot of paperwork and taking a lot of notes at meetings with unhappy people.  No change there then.

Employment law is where the rubber meets the road – where people problems become legal problems and the law intervenes.  It can’t make Sarah a better manager, or Mary a more realistic employee.  It can’t make an organisation introduce the small interventions that prevent this type of problem  What employment law does do is penalise and sanction those organisations who get to tribunal after they haven’t done their part and a legal issue has arisen.

Of course if there are any ‘equality’ or ‘discrimination’ issues here, this turns into a nightmare scenario.  Sarah picked on me because I am white, transsexual…..  Even in unfair dismissal terms, the process of performance management can be a very long haul if it is started late and from an already-broken situation.

If there were no employment law and the organisation was free to act in any way, would that really solve this problem?  To what extent is the very existence of employment law the problem?

To my thinking, employment law, if incorrectly applied, can be a complicating factor, but it’s never the problem itself.   Giving long serving employees three warnings and an opportunity to change their behaviour doesn’t seem unreasonable.   In this situation would you really want to walk in and just sack Sarah or Mary (or both)?

There is another complicating factor:  in many organisations, both performance management programmes and warnings are often seen as the death knell for individuals – simply the start of an inevitable process of ‘managing someone out of the business’.  We need to do something to change that – but that’s not an employment law issue, it’s a cultural one.

It’s not employment law that gives us difficult problems.  The Sarah/Mary problem is one we get every day, and it has a relatively easy prevention plan, early on.  But allow it to fester to the point when employment law becomes an issue, and then you are in for a more painful remedy.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.
Tel: 08452 303050 Fax: 08452 303060
Website:  www.irenicon.co.uk
You can follow Annabel on Twitter

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Filed under bullying at work, discrimination, employment law, performance management

Employment law does not prevent performance management

If I had a penny for every time a manager told me that employment law prevented them from managing their staff, I would be so rich I wouldn’t need to work.

Most of the problems we deal with on our hotline stem from a failure to properly manage performance.  Whether it is ‘bullying’ or problems in managing maternity leave, selection for redundancy, even half the discrimination problems we get – they all stem from a failure to:

  • Design jobs people can succeed in
  • Recruit people with the right skills
  • Set achievable goals within that job
  • Adequately resource for success
  • Monitor performance and feedback
  • Adjust course where needed

When we talk to employees within teams we find them saying – management won’t touch x person because they are protected by discrimination law, management don’t tackle poor performance early enough or clearly enough.

The managers say employment law stops them doing this.

Employment law is not that tricky if you know what you are doing.  Some organisations are cursed with the ‘employee from hell’ but most are not.   You don’t have to wait until you can’t stand it any more and then try to shoe horn ‘employment law’ into a last minute dash towards dismissal (with the replacement waiting in the wings).  You can integrate the basics into a simple performance management system.

If you are struggling with manage your team (or an individual)  and thinking “if employment law didn’t exist I’d…………….”  now is the perfect time to start working on that problem.

Employment law is not going to stop you managing poor performance in your business if you know what you are doing.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy. Tel: 08452 303050 Fax: 08452 303060 Website : www.irenicon.co.uk. You can follow Annabel on twitter – http://twitter.com/AnnabelKaye

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Filed under employment law, performance management

No staff, no employment law problems? Think again!

Do you think employment law is nothing to do with you?

Don’t have any staff?The tax man may want tax from you

Think again:

You might find yourself having an uncomfortable session with the tax man.

 

  • You can be liable for tax and national insurance for self-employed workers
  • You don’t automatically own the copyright in designs produced by sub contractors
  • You can be liable for injury to contractors as well as staff
  • Workers have discrimination and other statutory rights even if they are self-employed
  • ………… and there is more

Entrepreneurs tend to start with very informal business structures and then things grow over time.  It is easy to imagine that having good relationships with the people around you means you won’t run into trouble.

Sometimes that works, but other times it is a disaster – when the relationship breaks down there is nothing to protect you from harm.   It’s heartbreaking when we hear from people who say “I trusted them” and there is no agreement to set out who is doing what.   Even large business can have blind spots when it comes to freelance workers.

We have come across businesses who did not own their own website or designs in their own work. We have worked with others who spend months tolerating behaviours they could have put a stop to right away.   We know of others hit with tax bills going years back because they couldn’t meet the current IR35 test and owe tax to the revenue (talk to your accountant about this)

We are not trying to frighten you, but it is a good idea to get real at an early stage.

If you want to think about this in terms of your own business, check our regular free teleseminars on managing freelance workers.  http://koffeeklatch.co.uk/category/events/

If you are using freelance workers and have no agreements in place check out our agreements and guidance.  Designed using more than 30 years of experience in what can and does go wrong – save yourself the experience and set it up right! http://koffeeklatch.co.uk/category/contracts/.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy. You can follow Annabel on twitter – http://twitter.com/AnnabelKaye

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Filed under contract, employment law, free stuff

Strategic redundancy

There is a longer term, more strategic way to deal with redundancy.  In this world of accelerating changes to business processes, communications media, product and customer base, the structure of an organisation is an inherently unstable thing.  The days are gone when we can produce a long term plan for the workforce with any degree of confidence that we know who and what we will need.

We need to:

  • contract people to wider and more flexible roles (without weighing them down with impossible job descriptions and workloads)
  • arrive at a point when all jobs evolve and flex (both in the interests of the employee AND the organisation

 The key skills for the workforce of the future will be the ability to learn.  We cannot ‘buy’ labour with ready made skills and knowledge that will last through a long term career. 

Yet we still try to fit new recruits and processes into organisational structures that are not really able to contain their potentials and achievements, nor reflect clearly the demands that may be made on them.

For example

  • Accountant work with Sales when potential large clients want financial data, and the skill requirements  between the two groups begin to merge
  • TUPE projects often need multi-disciplinary approaches from HR, Sales, Finance and Business Development.

If our focus were on recruiting individuals who were able to learn new skills and investing in them as they did their work – then when the needs of the business changed a higher proportion of individuals would be able to change with it.

We could also use flexible working and worklife balance to give us a longer term pool of skilled workers who are ready to work longer hours at a later date when their circumstances change.

We could then find ourselves with fewer mass redundancies and fewer skill shortages.   Is that really impossible to organise?

Click these links for other blogs on redundancy :

https://irenicon.wordpress.com/2009/08/27/the-spaces-in-between/
https://irenicon.wordpress.com/2009/11/09/redundancy-on-the-move/
https://irenicon.wordpress.com/2009/10/28/season-of-discontent/
https://irenicon.wordpress.com/2009/04/07/an-inconvenient-truth/

and link to this web page on Irenicon – http://www.irenicon.co.uk/Consultancy/redundancyforemployers.html

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.   Tel: 08452 303050  Fax: 08452 303060  Website : www.irenicon.co.uk.  You can follow Annabel on twitter – http://twitter.com/AnnabelKaye and check our regular articles and news throughout the autumn on our blog site – https://irenicon.wordpress.com/

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Filed under employment law, redundancy

Future Of Part Time Work

Organisations still tend to have trouble with part time women who want to work at senior level (though there are some notable exceptions).

There is a feeling that being ‘senior’ requires full time attendance – at least until you get to be a non executive director!

Part time workers tend to get the double whammy of earning less because they work less hours AND because they are relegated to less senior posts.

Perhaps the time is coming to clarify the supervisory and managerial elements of pay in a way that allows for job splitting, part time working and role tailoring.  Just as many non cash benefits have been converted to pay (e.g. company cars).  Perhaps it’s time for the compensation and benefits people to come up with a new pay structure that is transparent, fits the organisation’s needs and reflects the modern world.

How about a basic FTE wage for everyone that is the same, to which are added supplements per direct report, per indirect report, per £k of budget controlled, or other measureable financial criteria.   We can have uplifts for being on target and reductions for taking mad risks.  We can have elements for specialist knowledge qualifications and experience.

Then, if someone wants to take a step back, reduce their number of hours/reports/level of responsibility, they can calculate for themselves what this would mean financially.  Wouldn’t it make flexible working requests easier to deal with now if the person making the request could reasonably anticipate what this would mean for them financially?

Then, if someone wants to go part time, we know what elements of their role we are splitting (and which elements we are not).

Why not have a pay scale that does not automatically reflect the hierarchical structure of the organisation?  Why not pay some ‘niche players’ more if they are really worth that much?

The future world of work is not the past and maps are already out of date.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.   Tel: 08452 303050  Fax: 08452 303060  Website : www.irenicon.co.uk.  You can follow Annabel on twitter – http://twitter.com/AnnabelKaye and check our regular articles and news throughout the autumn on our blog site – https://irenicon.wordpress.com/

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Filed under benefits, employment law, flexible working