It is well known that businesses using self-employed workers in place of employees have some advantages. At least twenty legal protections do not apply to the self-employed. Examples are unfair dismissal, holiday and sick pay, redundancy pay and statutory minimum notice. While this is possible in certain jobs, is it possible in Hospitality?
To be legally accepted as self-employed, various tests are applied. This will be if:
- There is no obligation to provide personal service; or
- There is no mutuality of obligation; or
- They are carrying out a business and the other party is the customer.
In an investigation, HMRC and employment tribunals will look at the following factors (not all are required to be true):
- The employer does not exert a high level of control over the individual.
- The individual is not integrated into the employer’s business.
- The individual actively markets their services to the world in general.
- The engagement is relatively short in duration
- The individual is providing specialist services
- The individual invoices for fees
- The individual supplies the equipment needed to perform the service
- The individual carries a level of risk (for example, if the work is not done, the individual does not get paid).
Considering these factors, very few jobs in hospitality could be provided on a self-employed basis. The following are examples:
A Head Chef would fail on the control aspect as he would have a rota to follow. On the other hand, an Executive Chef who is more of a consultant, working their own hours for more than one customer would meet the legal test.
Many kitchens are operated on a contracted-out basis where the “Head Chef” employs the kitchen staff and invoices for the service provided even where the materials are purchased by the Client. The key is that the employer does not have control over which individual works in the kitchen and when they are present.
A similar example in a hotel is where Housekeeping is contracted out to an individual and they employ their own staff, working to an agreed cost per room.
It should be noted that in all the above examples the “contractor” must register with HMRC as self-employed by 5 October after their first tax year and submit a tax return covering their self-employment. They must also register for a payroll scheme if they employ staff and pay any of them more than £123 per week or if they have second jobs.