Hiring a carer? – 5 key things you must understand

Introductory agencies don’t decide if your PA is self-employed – you do

If you take someone on, one of the first things you need to do is work out their employment status – that is whether they are employed or self-employed. This is for the purpose of deciding whether you need to operate PAYE on their wages and what employment law rights they are entitled to.

This applies even if you find your PA through an introductory agency.

Some introductory agencies say that the PAs they provide are self-employed, saying things in the marketing material like ‘(we) provide families seeking care with the opportunity to select their own independent, self-employed carer’, ‘our professional carers are self-employed for tax purposes’, and ‘you won’t have to liaise with the tax office or worry about holiday pay and sick pay’.

The idea of a self-employed PA can be attractive because it removes much of the administration associated with being an employer and can save money. However, it is your responsibility to check the PAs ‘status’.  Even if you find your PA through an introductory agency and the agency say they are self-employed, it is still your responsibility to check by considering all the facts and applying the status tests to those facts.

Although it is possible for a PA to be self-employed, in reality, many PAs are probably not self-employed because they must perform specific tasks/cannot turn up and leave when they want/cannot send a substitute, etc – more on this below. So you should not rely on what you are told by the agency and must check the status yourself. Treating someone as self-employed incorrectly can leave both you and the PA with problems.

To be clear – ‘self-employment’ is a question of fact, not choice. There are no special rules that apply to people taking on PAs, notwithstanding the special nature of the arrangements. It is not for introductory agencies to decide if someone is self-employed – it is your responsibility to do this.

There is guidance and help available to help you check the status of your PA - see our website. 

A genuinely self-employed PA is probably the exception rather than the rule

Although we know that there are a lot of self-employed PAs out there, in our view, most PAs are unlikely to be genuinely self-employed if the status tests are applied to the facts correctly. We think that some of the ‘false’ self-employment out there may be down to confusion around how to apply one of the key status tests – right to substitution.

A key hallmark of self-employment is that the self-employed person usually has the unfettered (or unrestricted) right to provide a substitute of their choosing to complete the job in his or her place. For example, this would mean if your PA is ill or has another client to see at the same time, they could send someone else in their place. Yet due to the very personal nature of your relationship with your PA, it may not be appropriate for them to be able to send someone else in their place if, for whatever reason, they are unable to perform their duties.

In addition, for unfettered substitution, we’d broadly expect the following:

• You cannot give permission, ‘vet’ or in any way restrict whom your PA sends in their place.
• The substitute PA isn’t someone from a pool of workers regularly used by you. 
• The substitute PA isn’t interviewed or subject to any form of selection process, other than confirming they’re qualified to undertake the role.  
• The original PA mustn’t require written permission from you to provide a substitute and must have free rein to replace themselves as and when they see fit.  
• The original PA must pay the substitute PA themselves.  

If any of the above don’t apply, it’s likely that the right to provide a substitute is fettered. In reality, this means there is no right to substitution. Although this is just one of the status tests to be considered, this makes is quite hard for the PA to be genuinely self-employed.

HMRC’s guidance in relation to care provided in a client’s home, set out in the Employment Status manual, says that although most PAs that look after someone in their own home are likely to be employees…’on occasions the facts may indicate self-employment. For example, it may be the case that a care worker looks after a number of people concurrently and has a business organisation in place.’

This means that it is not impossible for a PA to be self-employed but it is likely the exception rather than the rule. We give an example of a self-employed PA in our factsheet.

Only people with capacity should be the registered employer with HMRC

If the PA you are hiring is an ‘employee’, the next step may be to register as an employer with HMRC so that a Pay As You Earn scheme (PAYE) can be set up. The PAYE regime requires tax and National Insurance to be deducted from most payments made by employers to employees.

You must register with HMRC (and thus operate a PAYE scheme) if any of the following are true:

• You are paying them at or above the National Insurance Lower Earnings Limit (£123 per week in 2022/223)
• The employee already has another job
• The employee is receiving a state, company or occupational pension
• The employee is receiving employee benefits

In terms of who should register as the employer, in most cases this will be the person receiving care as it will be him or her who is making decisions about employing a PA, has practical control and direction of the PA, actually communicates with the PA and pays them. They would be considered the employer under general principles, and so should register as such with HMRC.

But what if the person receiving care lacks capacity or is a child? In these instances, HMRC have confirmed the following to us:

‘Persons lacking mental capacity and children who are assessed for a Direct Payment are excluded from legislation from receiving the award. The Direct Payment will be paid to someone to act on their behalf. In the case of a child this is likely to be the parent or guardian and for someone lacking capacity it would be someone who the local authority has agreed is suitable to act on the individual’s behalf. Where the local authority has made the payment of an award to a suitable person it follows that they are responsible for using the Direct Payment for its intended purpose including providing care. If the individual for whom the Direct Payment is awarded requires care then the person in receipt would be expected to arrange it which would mean that they have to enter into an employment contract with the service provider and should therefore be treated as the employer. This means that neither a child nor someone lacking capacity can be an employer and shouldn’t be registered as such by HMRC.’

This is clear that in cases where the person receiving care lacks capacity or is a child then they should not be registered as the employer with HMRC. Instead, the person who is responsible for arranging their care should be the registered employer.

If you come across a situation where HMRC say that the person lacking capacity or a child should be the registered employer, please let us know so that we can feed back in to HMRC, as it is not correct.

Once the decision is made as to who should register, we provide step-by-step instructions on how to register, in our guidance.

Running a payroll isn’t as hard as you may think

Running a payroll is the process by which you pay an employee’s wages and make appropriate deductions.

It can include the following tasks:

• Collect information about your new employee, e.g., National Insurance number, tax code.
• Make sure you correctly calculate their pay
• Pay statutory payments where they apply (such as Statutory Sick Pay, Statutory Maternity Pay and Statutory Paternity Pay)
• Collect student loan repayments and/or other types of deductions from pay, for example those ordered by a court
• Operate PAYE to collect income tax and NIC on your employee’s pay
• Send details of the payments made to your employee to HMRC at regular intervals.
• Give your employee a payslip with each payment
• Pay the tax and NIC to HMRC at the correct time
• Give your employee an annual statement on form P60 if they are employed by you at the end of the tax year
• Potentially deal with benefits and/or expenses and auto-enrolment.
• Take any action required when an employee leaves
• Keep good records of employees and the payments you make

This list may look overwhelming, but not all of these tasks are required all of the time – many are one-offs or things you would do once a year. In reality, only a few are ongoing tasks and many of these – including calculations, submitting information to HMRC and producing payslips – can be done at the touch of a button using payroll software.

There are several options for payroll software on the market including some free ones like HMRC’s Basic PAYE Tools (BPT), which is simple, secure and reliable. We explain all the options in our guidance.

We understand that not everyone will want to run their own payroll, there is also guidance on finding a payroll provider to help with payroll tasks.

Direct Payments should cover all costs of employing a PA

Being an employer can bring with it different costs including:

• The cost of employer’s liability insurance
• Paying at least the minimum wage
• Paying into a workplace pension scheme
• The cost of payroll support
• Paying holiday pay/statutory sick pay/redundancy pay

If you receive money from the government, then our understanding is that these costs should usually be covered in the payment you receive. However, this is a complex area and something you should take advice on if you think you are not receiving enough money to cover these extra costs.

If you do not think that the money you are provided with is enough, please note that taking on your PA on a self-employed basis is not the solution. As we explain above, whether someone is self-employed is not a choice.

In most parts of the UK there is a framework of providers in place to support Direct Payment recipients. You could also try reaching out to the ILG community (ILG Community) where, upon joining, you will have access to a national peer support group for individual employers hosted on Facebook, alongside other useful resources for employers. There are also organisations on a national level – for instance, in England, we can point you in the direction of In-Control  where you will find lots of relevant info around your rights under the Care Act.