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Hiring a Freelancer

Hiring a Freelancer | Ashored Bookkeeping and Accountancy

Introduction

When your business needs workers with specific skills for a short-term project, you might consider hiring a freelancer. Freelancers have a different legal status from employees. They are self-employed workers who provide their services on a business-to-business basis. Freelancers have a different legal status from employees. They are self-employed workers who provide their services on a business-to-business basis.


Here we summarise the benefits of using freelancers and the tax implications of hiring a freelancer. It also identifies some of the key issues to consider when working with a freelancer, such as insurance and health and safety.


The information is a starting point only. Rules relating to tax and employment status are complex, and professional advice should be sought where appropriate.


Benefits of using a freelancer

Using freelancers provides you with flexible access to specialised skills and experience when your business needs them. As self-employed workers, freelancers provide their services to you under the terms of a 'contract for services', not an employment contract, which means that they have fewer rights than employees.


Key advantages of using freelancers include the following:

  • You do not have to offer benefits typically provided for employees, such as holiday pay or enrolment in a pension scheme.

  • Freelancers do not have the same protection against unfair dismissal that employees have, making it easier to end the relationship when the freelancer's work is no longer needed.

  • If your business is small and you have no employees, hiring freelancers will not require you to take out employer's liability insurance or register as an employer with HM Customs and Revenue (HMRC).

  • You will not usually need to provide equipment, since freelancers typically use their own equipment and resources.


Tax and employment status

When you hire someone as a freelancer, you do not have to deduct tax and National Insurance contributions (NICs) from their fee and pass them to HMRC as you would with an employee, and you do not have to pay employers' NICs. Freelancers are responsible for managing their own tax and National Insurance affairs.

To determine whether someone is a freelancer or an employee for tax purposes, HMRC takes into account a range of factors such as the degree of control they have over their work and whether they work for more than one client.

Check Employment Status for Tax (CEST) is a free online tool provided by HMRC that you can use to assess whether someone you are hiring is self-employed for tax purposes. You can also use it whenever there is a change to their contract or working arrangements, to make sure that the change does not affect their tax status.

For more information, and to use CEST, go to www.gov.uk/guidance/check-employment-status-for-tax.


Health and safety

Under health and safety legislation, you have a duty of care to protect the health and safety of anyone who may be affected by your business activities, including freelancers who visit or work on your business premises. According to the Health and Safety Executive, it is essential to communicate clearly with freelancers about any health and safety risks they may face and to provide them with any necessary health and safety information, such as fire safety procedures at your premises.

The HSE publishes a guide on the health and safety issues of using freelancers at www.hse.gov.uk/managing/delivering/do/organising/managing-contractors.htm.


Insurance

Although you are not legally required to take out employers' liability insurance when using freelancers, it is important to ensure that you are insured against any injury or ill-health that a freelancer suffers as a result of working for you (for example if they have an accident at your premises).

It is essential to check with your insurance provider whether your policies cover freelancers working for you. For example, some (but not all) employers' liability insurance policies and public liability insurance policies may include this type of cover.

Some businesses also require freelancers who carry out work for them to be covered by their own public liability insurance policies. Depending on the type of work the freelancer will be carrying out, it may also be important to require them to hold professional indemnity insurance, which will cover the cost of claims made by anyone who has suffered loss or damage arising from negligent work provided by them.


Contact Ashored for help with Freelancing and Employment issues.

Contact Ashored Bookkeeping and Accountancy | Truro Cornwall

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