HMRC are becoming increasingly vigilant about the businesses they are investigating and have intensified their investigations into rural and equestrian businesses in particular. Here, McClarrons insurance brokers look at what you need to consider.
What makes an employee, an employee?
An employee is someone who works under an employment contract. Incorrect employment status is a more common mistake than you might think. Often, people are advised they are self-employed when in reality, they should be regarded as an employee. This is usually simply down to a misunderstanding of when a person needs to be categorised as an employee working under an employment contract or self-employed.
Those who are self-employed pay their own tax and National Insurance but also set their own working hours, holiday, rate of pay, issue invoices for work carried out and generally, work for more than one company or person. If you advise someone who should be an employee that they are self-employed, it is unlawful and has the potential to lead to an employment tribunal. Therefore, it is important that you review who your employees are, whether they are workers, volunteers or self-employed, and what their rights and duties are, as well as considering your own.
Employers Liability
It is not only important to have your staff on the correct employment basis but once you do, with the correct Employers Liability insurance in place for your needs. As soon as you become an employer, you must, legally, have an Employers Liability Policy in place, with cover for at least £5million through an authorised insurer.
Alternatively, if you use truly freelance/self-employed/contract workers, you need to ensure they have the right Public Liability cover. Proof of this should be provided and kept on record. At McClarrons, we are happy to advise on the level of cover you and/or your contractors may need. It is important this cover is in place to protect all parties should an accident occur.
Employment Contracts
As an employer, you will have ‘contracts of employment’ between you and your employees as this is a legal requirement. Employees should be issued with a written contract within two months of the start of their employment. Failure to supply this within these set timescales could result in a fine and at worst, legal proceedings.
Employee contracts should outline the employment conditions, rights, responsibilities and duties and are there to protect both the employee and you, the employer. There may be additional things that need to be considered and documented for employees, such as training plans, livery or accommodation arrangements.
Wages
The National Minimum Wage (NMW) must be paid to those employees who are eligible for it; there are no exceptions. Every April, the government reviews the NMW – the current rates of which are set out below.
|
£8.21 |
25 and over rate |
|
£7.70 |
21-24 rate |
|
£6.15 |
18-20 rate |
|
£4.35 |
Under 18 rate |
|
£3.90 |
The apprentice rate, which applies to those under 19 or those who are over 19 but in the first year of their apprenticeship |
The hourly rate you pay workers must be at least the minimum wage and will be set out in the employment contract. Employers must pay this rate for every hour worked – failure to do so is illegal.
Any extra hours worked must be paid at this rate too or given as time off in lieu. A written record should be kept of any extra hours worked and when these were taken back as time off or when they were consequently paid for.
Payslips should be issued regularly and should make clear the gross amount of wages, the amount of any fixed or variable deductions and the reasons for them, e.g. National Insurance, Tax etc. and the net value of wages.
Deductions
If you have a worker who you provide accommodation for, there is a maximum amount that can count towards their National Minimum Wage pay – this offset is £7.55 a day or £52.85 a week. Like the minimum wage, this rate can change annually when it is reviewed by government in April. If a staff member does get benefits like livery or accommodation, they should be billed back for these, rather than costs being deducted from their wages.
Rural Protect – Specialist Management Liability
At McClarrons, we offer Rural Protect – a specialist Management Liability policy for rural businesses, which can include Employment Practices Cover. Through the policy, you get complimentary access to law firm, rradar, who can provide free templates for employment contracts, helping you to stay on top of your duties as an employer. Being proactive helps you run your farming business effectively, as well as reducing the chances of HMRC finding anything out of place or finding yourself facing an employment tribunal.
Rural Protect also offers support should you find yourself needing legal representation and advice to defend yourself or to take action against an employee. The policy provides you not only with legal representation but also covers the fees for this. With premiums starting at £405.80 (including Employment Practices Liability), Rural Protect offers affordable protection that could be invaluable in the event of an employment dispute or claim made against you by HMRC; it also protects you against claims made by all other UK regulators.
If you have any questions relating to insurance or would like to know more about our Rural Protect policy and what else it covers, contact McClarrons’ Farm Team on 01653 609152 or by emailing farm@networkportfolio.co.uk/mcclarroninsurance.com.
