Employ at your peril
Article Date: Nov 03 2005
Outsourcing options
One option that many employers, faced with all these costly impositions, will want to study as an alternative to employing staff is outsourcing. Why not employ contract labour or freelancers?
After all, with direct employees, as well as the pitfalls of discrimination and redundancy, employers have a statutory obligation to deduct employees’ income tax and national insurance contributions at source — for both full- and part-time and remit them to the authorities. They are obliged to pay a minimum wage and provide paid holidays, not to mention paid maternity and paternity leave.
Needless to say, it is not as simple as it seems to switch to outsourcing and evade all the modern obligations of employment. ‘It is a balancing act,’ says Guinan. For example, it’s probably fine if you hire a self-employed contractor, who can be seen to be working on his own account and can be easily substituted for another and handles
his own tax and National Insurance. But if the contract is for personal services and subject to your control, this will probably be deemed direct employment.
As Jo Evans at Lewis Silkin explains, it is essential to reach a clear agency agreement if using agency staff, setting out who is responsible for what and
who bears what risks. ‘It is crucial that the agency plays ball,’ she adds, and it
is also vital the agency handles its own tax affairs.’
Agency staff are more suited to project work, especially in a field such as advertising, she argues. However, in operations where skilled agency workers develop key working relationships with your customers or suppliers, they can create goodwill for your company in the process — which they could take away with them in a way that could be hard to prevent.
Galling as it may be, most employers working to build up their companies have little choice but to knuckle down and formulate codes for their employment practices, scrupulously keep staff informed as to what they are and — most irksome for a small group without the luxury of a human resources department — keep themselves informed of the frequent changes in the rules.
Informal arrangements, such as giving some loyal and/or outstanding employees favoured terms, have a nasty habit of crystallising over time from favours to entitlements. Outsourcing can work for some, but by no means for all and can bring its
own risks. In the words of one adviser in this field, ‘the days of the owner-manager being master in his own house are long gone.’
