employee or self employed?

[stupro]

Hi there, thanks for having me on the forum!


A good friend has purchased a franchise with a courier company and has invited me to work with him. Are there any pro's and con's in being an employer as opposed to self employed in this instance?

Thank you

[FlamingParrot]

Re: employee or self employed?

Hi and welcome aboard

A good friend has purchased a franchise with a courier company and has invited me to work with him. Are there any pro's and con's in being an employer as opposed to self employed in this instance?

Thank you

There are pros and cons to both options. :decision: I assume you mean an 'employee' rather than an 'employer' on your post above.

As an employee, you have more security and protection, although nowadays you need to work for your employer at least two years before you are entitled to redundancy pay or to claim unfair dismissal. During the first couple of years, you don't have much more security as an employee. Once you've been there two years, you *could* be considered an employee even if you are self-employed, as long as certain criteria are met, do bear that in mind.

Being self-employed has obvious tax advantages as you are allowed to deduct expenses such as travel and even part of your own utilities, rent, insurance, phone bills, broadband, etc. as business expenses which you can't do as an employee. However, your 'employer' will not pay NI contributions for you, nor will you participate in a workplace pension scheme. You may not get holiday pay or sick pay but you should be able to take time off more easily, for example, in excess of what a normal annual leave allowance would be. Many companies do not allow unpaid leave or holidays longer than two weeks in a row. You will be responsible for making your own tax returns and will have to put some money aside to pay your taxes once a year.

As an employee your employer will have to pay NI contributions and contribute to a workplace pension, you'll be entitled to holiday pay and get paid for BHs. If you're unwell, you should at least get Statutory Sick Pay. Some employers do pay in full if you are only off for a day or two. Your employer will withhold tax from your wages so you won't need to worry about doing tax returns or putting money aside for taxes, however, you won't be able to deduct any expenses.

I know you say you'll be working for a friend but you just never know... As an employee, they will have to pay you every month/fortnight/week right on the dot, as self employed you will have to invoice them and they may take your time to pay you, or not pay you at all, in which case you'd have to go to the county court to attempt to recover your money. They may also decide to tell you there isn't enough work for you to do at some point and you will only be able to invoice for the hours they require you to work rather than full-time. It's a tricky one.

An alternative to being self-employed is to set yourself as a company director. An alternative to being an employee is to use an umbrella company as many contractors do, which can have some tax advantages without having to set up a company. When it comes to tax advantages, they may not be that great if the amount you get paid isn't a lot. The higher your pay, the more significant they become. If they are not going to pay very much, you may be better off as an employee.

You really need to do a bit of research and also ask a lot of questions about the hours you will be expected to work, holiday pay, sick pay, etc. and what would happen either way. Also how well do you know this person? Can you trust them to keep their word if you are not in a legally binding employment contract?

Just some food for thought...