Employed or self-employed? This guidance provides some simple steps for all parishes to follow when determining the employment status of their workers.
It is the responsibility of the PCC to determine whether those that are working are employed, self-employed or registered as a Limited Company.
Employment status can affect tax and National Insurance Contributions (NICs) and entitlement to benefits such as holiday or statutory sick pay.
The decision on status needs to be based on facts around key terms and conditions on offer and the PCC’s working relationship with the individual, not just because someone says they are self-employed.
Definitions of employment status
What is a worker?
A worker may occasionally do work for the parish. The parish doesn’t have to offer them work and they don’t have to accept it. Their contract uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar. The Parish will be deducting tax and National Insurance contributions from their wages and will be providing the materials, tools or equipment that the worker needs to do the role.
What is an employee?
The majority of people provide personal service as an employee under a contract of employment. The individual is an integral part of the church and is paid through a Pay As You Earn (PAYE) system. The church has an obligation under the contract to offer work, and the employee has an obligation to accept the work offered, within the scope of the contract.
What is being self-employed?
Self-employed contractors normally provide one-off or specific services for a fee which is then invoiced to the parish. They will pay their own Income Tax and National Insurance Contributions. They do not have employment rights such as statutory holiday but they do have some legal protection such as an entitlement to a safe and health working environment.
What is a limited company?
An individual may set up themselves up as a limited company for tax purposes, as opposed to being self-employed. This means that the parish pays the company for work completed as opposed to the individual and corporation tax is payable as opposed to personal tax. There are specific tax laws in relation to limited companies so if someone informs you that they are registered as a limited company, it would be advisable to check the situation with the HMRC.
With so many options, how will I decide on employment status?
Look at your records and collate any information you have on your workers, including but not limited to:
Contracts or letters to the individual
General working patterns
Payments made to date and any entitlements
Process for payments being made
General expectations of the individual e.g. any role descriptions or briefs
Indications of involvement in day to day parish life – e.g. copies of organisation charts, staff lists
We suggest you use a spreadsheet tab or Word document for each worker and create a list of the information gathered against the relevant indicators.
This will help you build a picture and come to an objective decision about their status.
This is the process you can use to identify the status of your worker.
Indications that a worker is your employee
Can you tell them what work to do, as well as how, where and when to do it?
Do they have to do their work themselves (i.e. they can’t ask someone else to attend in their absence)?
Are they an intrinsic part of the organisation, for example, do they appear on the parish website, have a parish email or direct number, work in the parish location and represent the parish at events?
Are they expected to turn up at certain times / are contracted to work a set number of hours?
Do they receive a regular wage or salary, even if there is no work available?
Do they have benefits such as paid leave or a pension?
Do they have use of parish equipment?
Do they manage anyone else who works for you?
If you answered yes to a number of indicators, it is likely that your worker is an employee. It can be helpful to keep a record showing how you have established the status of your worker. If you would like to do this, use the Employment Status Indicator Checklist.
Indications that a worker is self-employed
If you have not already established that your worker is an employee, they may be self-employed.
Can they hire someone else to do the work you’ve given them, or take on helpers at their own expense?
Are they known in the parish as being self-employed and have a written contract for services?
Can they decide what work is done and when, where, or how it is done in order for a piece of work to be completed?
Do you pay them an agreed fixed price – i.e. it doesn’t depend on how long the job takes to finish?
Can they make a loss or a profit?
Do they use their own money to buy significant tools and equipment, business assets, pay for running costs and so on?
If you ticked yes to a number of indicators, it is likely that your worker is self-employed.
You should now have worked through the information and indicators and established each workers’ employment status. If that is the case, you should speak to the individuals and explain whether any changes are required.
Correct any paperwork (see templates) and ensure that the relevant statutory provisions are set up, for example tax and NI, statutory sick pay and annual leave (if employed).
Keep any lists and records of decisions made during this process just in case the HMRC have any questions.
Review regularly, for example, at least annually or whenever the situation changes.
Our new parish administrator has told us that they would like to be self-employed, is that ok?
Just because someone says they are self-employed, it doesn’t mean that they are.
Employment status is based on the key indicators shown. Each situation must be based on its own merits and an assessment should be carried out for each person. You can use the Employment Status Indicator Checklist.
What about my organist?
The appointment of organists and Directors of Music is covered by Canon Law (Canon B20), contract law and as appropriate, employment law.
The status of the working relationship between the organist and parish can be determined using the employment status indicator. In most cases, as there is generally a high degree of mutuality and control, you will find that the organist is an employee of the PCC.
In terms of the remuneration, there has been a tradition of describing payment to the organist as an honorarium. However a true honorarium is a ‘one-off’ payment after the event to say thank you to someone, it is not usually pre-determined. Therefore, paying a regular sum of money each week or month (even where it is topped up occasionally with separate payments for weddings, funerals etc) is likely to be regarded as a ‘salary’.
Recent employment tribunal case law (2008 onwards) suggests that tribunals are of the mind that most if not all organists are employees; even if the parties have explicitly agreed at the beginning of the working relationship that it is one of self-employment. Therefore, it is generally safest to establish an employment contract.
Our office manager runs their own business on the weekends. Therefore is it ok that they are going to be self employed in our parish too?
It would be possible for someone to be employed by the parish during the day but running their own separate business on the weekends. You should look at their parish role separately as they could well be in an employment situation.
We run a bar and have a group of casual workers who work occasional shifts as and when required. They are self-employed and paid in cash, is that ok?
You need to establish the facts. It is likely that they would not be self-employed owing to the obligation required when they are working but at the same time the parish may not want to give them a regular contract. It may therefore be appropriate to provide them with a casual worker/zero hours contract on the PAYE system. Cash in hand is unlawful if no proper taxation records are kept.
I feel like I need more support in establishing the status of our workers
The Employment Status Indicator (ESI) is a HMRC online interactive tool that asks you a series of questions about the working relationship between you and your worker. HMRC will accept the tool’s outcome as binding, as long as your answers accurately reflect the terms and conditions under which your worker provides their services. You must also retain a printout of the ESI result screen and the Enquiry Details screen showing your replies to the questions asked. We suggest you use this tool as part of your general picture building not as a sole tool on its own.
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