There are two options available to engage domestic staff: as self-employed contractors or as formal employees with tax withholding obligations. The legality of either option depends on the nature of the relationship between the individual and the employee.
Option 1 – Self-Employed
Employing an individual as self-employed is suitable if they have other clients, are not required to work for you full time, do not have a specific payment schedule, and if there exists a genuine contractor-client relationship. The person will be responsible for their own tax liability.
Option 2 - Employed
Typically, engaging an individual for specific hours each day ofthe week, such as 9 am to 5 pm or 8 am to 4 pm, and with them having no other clients would legally require the operation of a Pay As You Earn (PAYE) system to withhold taxes at the source and create an employer-employee relationship.
In this case, a formal employment contract between the employer and employee is essential. The employee is entitled to sick pay and holiday benefits. We recommend seeking professional advice from a qualified HR consultant to obtain an appropriate employment contract.
The employer must register the individual and obtain an Employer Reference Number to operate the PAYE system. Monthly payroll runs and online submissions to HMRC are mandatory, with all applicable taxes due by the 19th of the following month from which the wages are due.
The employer must also be aware of National Insurance Employer Contributions, which are currently set at 15.05%, and pension auto-enrolment requirements. Employers must enrol an employee in an occupational pension scheme after three months of employment, with an additional 3% of the salary as employer pension contributions.
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