In this week’s Money Matters – Ask the Experts column, from Goldwyns Accountants, based in Southend, Thomas Robinson, a chartered accountant and manager at the company, gets down to business on the question of employing casual summer labour.
As business gets busier in the summer, I’m thinking of taking on some casual summer labour. What do I need to know?
Thomas Robinson writes:
Taking on temporary staff during busy times is an important decision for a lot of businesses, especially in a seaside town like Southend where many experience a seasonal increase in trade when the sun finally makes an appearance and the school holidays begin.
Due to the nature of a lot of the seasonal jobs which appear over summer and the average age and experience of those looking for work – typically young adults filling time between school or college years – many roles tend to be relatively low paying. This can sometimes lead to employers thinking that they can pay staff “cash in hand” (i.e. paying an employee in cash and not deducting any tax, nor declaring anything to the tax man).
Unfortunately for those employers, HM Revenue and Customs have made the position very clear – any time you pay an employee you have to report this, regardless of how low the wages may be. Even if no tax is due, you must still include the employee in any payroll declarations.
It is worth remembering that although the rules and systems were brought in primarily to help HMRC calculate amounts owed to them and collect tax, they can also come to your defence if you ever have to defend yourself against a disgruntled employee or ex-employee who has used the HMRC whistle- blowing service to settle a score.
Payments can be made in cash, but only after the correct tax and National Insurance has been declared and deducted. However, many (if not most) businesses prefer the additional security offered by bank payments – to both reduce the amount of cash needed on the premises and to again provide a better paper trail if payments are ever disputed.
As all employers will know, there is an ever increasing number of hoops that have to be jumped through when taking on staff, but the most important of these is to ensure any new employee has the right to work in the UK before you employ them. If you don’t check, or can’t prove to HMRC that you did, you can be fined up to £20,000 per illegal worker and your businesses details may be published as a warning to others. The punishments for knowingly employing someone who does not have the right to work in the UK are even greater.
The best advice that any accountant can give someone considering taking on new employees is to go by the book – for both your own and your employees’ protection – and to ask pertinent questions before you make any decisions. If you don’t, it could cost you dearly.
This article was originally published in the Southend Echo on 11 July 2017.