Despite what you may have been told, using subbies long-term is not a grey area. There is no limit on how long you can work with subbies – nothing in UK law and nothing in HMRC’s regulations.
So why on earth does it cause so much confusion?
Probably because there is no clear definition of what “long-term” means. Is it three months, six months, ten years? Or is it when subbies work on multiple projects for you?
What’s the difference between using a subcontractor on a single project that takes two years and using a subcontractor for two years on eight different projects?
Because if the subcontractor is genuinely self-employed, you can work with them for as long as you want on as many projects as you want.
When the lines get blurred
The issues with using subbies long-term have nothing to do with how long you work with them or how many projects they work on.
The issues come when the lines start to get blurred and when subbies become employees in all but name.
You start giving your long-term subbies more responsibilities – tasks that would usually fall to an employee. You start to become reliant on them, assuming they’ll continue showing up for as long as you need them. You start covering little expenses for them here and there, loaning them your vans and tools, paying for their petrol, even giving them a small Christmas bonus.
And that’s all well and good while the work is there and HMRC aren’t looking in your direction.
But what happens when the work suddenly dries up, and you have to lay your subbies off? When a no-win no-fee solicitor tells them they could claim unpaid holiday and unfair dismissal because they were technically an employee?
How about if HMRC starts questioning why your subbies use your company fuel cards if they aren’t employees?
That’s where the lines start getting blurred, and what should be black and white becomes grey.
Because if a subcontractor is deemed to be an employee in practice, even if not in name, they may be entitled to the same rights and benefits as regular employees. And you could find yourself having to cough up for unpaid income tax, NIC and pension contributions.
How to unblur the lines
The best way to unblur the lines is to put a bespoke contract in place between you and your subbies.
It’s hard to argue that a subcontractor is an employee if you have a contract that clearly shows they are a business in their own right.
But it’s not enough to use an off-the-shelf contract template. Your contract must match up with reality.
It’s no good having a right-to-substitution clause if you aren’t going to honour it. It’s no good saying subbies have to make good any faulty work at their own expense if you don’t enforce it.
Your contract has to reflect the way you actually work with your subbies.
But what if your subbies drive your vans?
Or use your fuel cards?
Or wear your uniform?
Or use your tools?
What if your subbies don’t have their own website?
Or do their own marketing?
Or have any other clients apart from you?
It doesn’t matter.
How you work with your subbies is not important as long as you have a genuine business reason for working that way.
How your subbies run their business doesn’t matter as long as they can prove they are a business in their own right.
Genuine business reasons
You probably have good reasons for why you work with subbies the way you do – all you need to do is ensure they are clear in your contract.
Your subbies can drive your vans if the use of company vehicles is reflected within the rates you pay them.
Your subbies can wear your branded uniform if they need to be easily identifiable on-site for safety and security purposes.
As long as what’s in the contract matches reality, you can keep working with subbies the way you do.
Business in their own right
For a subcontractor to be considered genuinely self-employed, they need to demonstrate they are a business in their own right.
But that doesn’t mean they need their own office. Or website. Or marketing strategy. Or hundreds of clients.
Plenty of businesses operate without a website. Plenty of businesses get clients without doing any marketing. Plenty of businesses get all their work through one or two sources.
None of these things determines whether a business is genuine or not.
What it mostly comes down to is whether they are at risk of making a loss. Because if a business can make a profit, it can also make a loss.
So if your subbies have to make good any faulty work at their own expense, they are at risk of loss.
Of course, this isn’t the only way to prove self-employment, but it’s a great start.
If you want to eliminate all the grey areas, the easiest way to do it is to put a bespoke, watertight contract in place between you and your subbies.
And we can help you with that.
All you need to do is be completely honest with us about how you work with your subbies, and we’ll do the rest. We’ll even get all your subbies to sign your contracts electronically.