Trading Method - Pay As You Earn (PAYE)
PAYE
Operating on a PAYE i.e. staff basis, is traditionally the most common method of trading. Your circumstances may determine that this is most appropriate to you, but, even if there are alternatives, you may wish to continue to trade in such a manner due to the employment rights and securities afforded under this mode of operation.
Taxation
Under a PAYE regime your total income will be subject to earned levels of income tax and National Insurance Contributions.
Employment Rights
As an employee you are afforded a number of employment rights. These include but are not limited to:-
- Sick pay
- Holiday pay
- Redundancy rights
- Unfair dismissal rights
- Age/sex discrimination rights
- Grievance rights
- Rest breaks
- Maternity/paternity/adoption pay and leave
- Pension provision
Your employer will also have a duty to ensure your well being by adhering to health and safety legislation.
Further information on your rights as an employee can be found at http://www.hmrc.gov.uk/employment
Contracts of Employment
Your employer has a duty to provide you with a written statement of your rights and obligations when entering into an employment relationship with you. This contract as a minimum, should set out the terms under which you have both entered into the employment relationship, your obligations and references to the employment rights listed above.
PAYE through a Recruitment Agency or Employment Business
An alternative to the traditional PAYE route is to operate as a contractor but on a PAYE basis through a recruitment agency or employment business (often referred to as being an agency worker). Under this regime you will not be classed as an employee of the end client to whom you provide your services, but of the recruitment agency or employment business through which you operate.
As an agency worker, you are covered by the National Minimum Wage Legislation, health and safety legislation and the Working Time Regulations. Flexibility for both the worker and employer is one of the features of agency work, meaning that just as you have the flexibility to take up and leave jobs at short notice, employers also have the flexibility to finish temporary work without being liable for unfair dismissal or redundancy pay.
There are important differences between temporary agency workers and those who are hired on fixed-term contracts. If you are an agency worker, your contract is with the agency, who must pay you even if the hiring company hasn't paid them. However, if you sign a fixed-term contract with the hiring company, the agency isn't responsible for paying you and you have different rights. Make sure you know what kind of contract you're signing so that you're clear about your employment status.
Your Rights as an Agency Worker
Agency workers are usually considered to be ‘workers’, not ‘employees’. Workers’ main rights include:-
- Paid holidays, rest breaks and limits on working time.
- No unlawful deductions from wages.
- The National Minimum Wage.
- Not to be discriminated against under any of the equality legislation.
- If you’re an agency worker, you have the right to Maternity or Paternity Pay, but not Maternity or Paternity Leave.
- You can also get Statutory Sick Pay if you’ve worked for the same agency for more than three months.
Agency workers may not get the same perks as permanent employees and may not get the same holiday allowance. You should check your contract to see what you might be entitled to or talk to your agency. Unless you can show that you are being unlawfully discriminated against there's probably not much you can do if you are getting fewer benefits.
The Rules Governing Agencies
Agencies are subject to a number of regulations - they:-
- Can't charge you a fee.
- Can't make you use fee-paying services (e.g. CV writing) as a requirement for finding you work.
- Can't stop you from taking a permanent job with a company where you temped and there are limits on the fees they can charge the company (sometimes called 'temp to perm' fees).
- Have to give you written terms and conditions.
- Can't stop you registering with other agencies.
- Finally, if they're an 'employment business' - they must pay you, even if they haven't been paid by the end client that you are working for. For further information please view conduct of employment agency regulations at http://www.opsi.gov.uk/si/si2003/20033319.htm
What to do if your Agency Breaks the Rules
Employment agencies can be fined and banned from operating for up to 10 years by an employment tribunal if they don’t meet proper standards.
If the agency has breached the terms of your contract you can take action yourself through the courts. If the agency makes an unlawful deduction from your pay you can complain to an employment tribunal.