"employing" a sub contractor

[GasmanxxxR1]

The work load for me is picking up with my own installations. Also I take installation work from utility companies and a big ish local firm.

A long term friend is a journeyman plumber and I have suggested to him that he becomes a sub contractor to me. The idea is we work together most days so we can get through, in theory, double the work load.

He is not GS registered and its my contacts that are bringing in the work. My mate is suggesting a 60/40 split of the money in my favour. He is a good installer with a wider knowledge of the plumbing industry and he has some contacts that could bring in different types of work.

I have worked with him in the past and we get on well, we have known each other for 20 years.

I have looked at HMRC website and think I can satisfy that he IS NOT an employee but a sub contractor.

What do you think I should do? Has anyone been in a similar position? Im looking for opinions, suggestions and wise council.

As ever thanks for your input guys

 

[cr0ft]

I think the acid test HMRC use to determine if he is an employee is does he do work exclusively for you or does he work for someone else?

Personally I wouldn't want to work with a mate, I really like to keep work and friendships/family totally separate but what works for me may not work for someone else!

Glad to heard you are busy though!

 

[village idiot]

Don't know much about sub-contracting. My only interest is in the payment split (60-40). That is considered reasonable except .........
You will be bringing in all the work, so need to be compensated for that by getting more, fact. But, if (as you say), he is more experienced and in my opinion, will do more, I would consider giving it a 50:50 split. Just my view.
Except it is a case where you're generating all the work, and bearing all the responsibility should anything goes wrong. In that case, then a 60-40 split is generous

 

[Millsy 82]

I wouldn't split it 60/40! You wouldn't turn around to bg and say I will sub to you and you will give me 40% of the profit! They would tell you to do one!

You are the one getting the work, going out to price the work, ordering parts, dealing with the customer, going back if there are any faults in yours or HIS work, waiting for payment (is he going to turn around and say "oh you haven't been paid don't worry about paying me!" I doubt that very much!)

40% the flaming cheek of some people!

 

[Millsy 82]

Personally I wouldn't want to work with a mate, I really like to keep work and friendships/family totally separate but what works for me may not work for someone else!

I worked for a "mate" once he took the P massively. From then on I would never work for a mate nor would I employ/ work with one.

 

[Ray Stafford]

Usually the definition of subcontracting involves the principle of substitution. IE, instead of turning up for work himself, he should be able to send a suitably qualified engineer in his place.

If that is not acceptable, and you require him PERSONALLY to turn up, then you have a "contract of personal service", or in every-day speak, "an employee". You will have the obligations to pay employers NI to HMRC and will be treated by other regulatory bodies as employer/employee, regardless of what you and he agree between you.

 

[GasmanxxxR1]

Seems I have to look at the 60/40 split. As I will be dealing with all the money and invoicing I can tip things into my favour. We are giving it a trial for 3 months to see how we go.

He is very open and honest and is willing to give and take. He knows if we dont work/perform we both dont get paid. He has been self employed before.

I know about the thing of working with friends, but it has the advantage of that I know him, hope to trust him and know that is workmanship is par with mine. So it has advantages and disadvantages. I a know his downsides so I will have to manage them, thats what we do in life though right?

The worst case scenario is that I go back to working on my own and I might loose his friendship. There is no investment of money from me.

 

[GasmanxxxR1]

Don't know much about sub-contracting. My only interest is in the payment split (60-40). That is considered reasonable except .........
You will be bringing in all the work, so need to be compensated for that by getting more, fact. But, if (as you say), he is more experienced and in my opinion, will do more, I would consider giving it a 50:50 split. Just my view.
Except it is a case where you're generating all the work, and bearing all the responsibility should anything goes wrong. In that case, then a 60-40 split is generous

He isnt GS registered and its mostly gas work we will be doing. His expertise is wide and varying in plumbing ie commercial, new build, plant rooms contract maintainence etc

 

[willing2learn]

I agree with Millsy, the split needs to be much greater in your favour, unless he's running the business with you, invoicing, pricing, return visits etc etc.

 

[GasmanxxxR1]

Just picking up from what Ray and Croft have said regards HMRC. In the real world they must know this happens. I know many GSR, electricians and builders who exclusivly work for big companies on a sub contract basis. They do no work from any where else. On a practical level it would be unacceptable to send a substitute without massive prior arrangement and I have never seen it happen.

I know where both Ray and Croft are coming from and believe me I have mulled it over. There is a list of yes or no questions on HMRC as to whether some one is an employee or not and on paper I can honestly answer that he wont be an employee, but on a day to day basis it might appear he is close to being my employee.

Loving all your help on this please keep it coming.

 

[Masood]

Usually the definition of subcontracting involves the principle of substitution. IE, instead of turning up for work himself, he should be able to send a suitably qualified engineer in his place.

If that is not acceptable, and you require him PERSONALLY to turn up, then you have a "contract of personal service", or in every-day speak, "an employee". You will have the obligations to pay employers NI to HMRC and will be treated by other regulatory bodies as employer/employee, regardless of what you and he agree between you.

Whilst that is true of most contractor/consultant type roles after IR35, CIS rules define contracting within the construction industry differently. As has been correctly pointed out already, the defining criterion is mainly one of exclusivity and autonomy:

Does he work only for you, or to such a large percentage of his time that it could be considered exclusive?
Do you explicitly instruct him, or dies he have autonomy in deciding how to structure the work and his time spent doing it?
Do you provide all materials or does he provide some and bill you for them?

There are other rules but these are the main ones. I'm happy to be corrected if I'm wrong but I've done a lot of reading of the CIS website, spoken with my accountant and with HMRC about CIS contractors as I did not want to fall foul of the rules...

 

[Ray Stafford]

Whilst that is true of most contractor/consultant type roles after IR35, CIS rules define contracting within the construction industry differently. As has been correctly pointed out already, the defining criterion is mainly one of exclusivity and autonomy:

Does he work only for you, or to such a large percentage of his time that it could be considered exclusive?
Do you explicitly instruct him, or dies he have autonomy in deciding how to structure the work and his time spent doing it?
Do you provide all materials or does he provide some and bill you for them?

There are other rules but these are the main ones. I'm happy to be corrected if I'm wrong but I've done a lot of reading of the CIS website, spoken with my accountant and with HMRC about CIS contractors as I did not want to fall foul of the rules...

I would bow to those with greater industry specific knowledge. My experience is more generic.

 

[GasmanxxxR1]

Whilst that is true of most contractor/consultant type roles after IR35, CIS rules define contracting within the construction industry differently. As has been correctly pointed out already, the defining criterion is mainly one of exclusivity and autonomy:

Does he work only for you, or to such a large percentage of his time that it could be considered exclusive?
Do you explicitly instruct him, or dies he have autonomy in deciding how to structure the work and his time spent doing it?
Do you provide all materials or does he provide some and bill you for them?

There are other rules but these are the main ones. I'm happy to be corrected if I'm wrong but I've done a lot of reading of the CIS website, spoken with my accountant and with HMRC about CIS contractors as I did not want to fall foul of the rules...

Thanks Masood

What is your experience? Do you employ people or have them sub contract? If its just me and one other guy is there a massive cost to me employing him?

 

[mfgs]

I would be wary of going into business with a friend. I have had friends work for me in the past as subbies and they do generally take this **** by going home early etc thinking that because I am a mate it wont bother me. When I am paying someone for a set amount of time, I expect that time and nothing less, and for them also to be fully committed to work during those hours.

I would also not offer a split of profit on the jobs. You are getting all the work from advertising, your contacts etc. You are doing the quotes, spending 20 minutes on the phone to them answering silly questions or dealing with emails about how the new programmable stat works. If you want to go ahead with it as you need more labour, I would put him on a good day rate and not offer a split of profit.

 

[GasmanxxxR1]

I would be wary of going into business with a friend. I have had friends work for me in the past as subbies and they do generally take this **** by going home early etc thinking that because I am a mate it wont bother me. When I am paying someone for a set amount of time, I expect that time and nothing less, and for them also to be fully committed to work during those hours.

I would also not offer a split of profit on the jobs. You are getting all the work from advertising, your contacts etc. You are doing the quotes, spending 20 minutes on the phone to them answering silly questions or dealing with emails about how the new programmable stat works. If you want to go ahead with it as you need more labour, I would put him on a good day rate and not offer a split of profit.

That's really great advice, thank you.

Nothing is set in stone, i guess i need to mull it over.

Most of the time we would be working at the same address so if theres any slinking off early, we'll both be at it

 

[smtplumbing]

i would put on day rate, sort mean extra for you tho remember tho he is no gs so plumbing rate he gets,

if your feeling nice give him some scrap haha or halfs or thirds

 

[GasmanxxxR1]

I have answered the questions on the CIS website and he would be deemed a sub contractor

 

[Nostrum]

I employ through CIS as a temporary measure, temporary to permanent hopefully. It can be a pain using HMRC's awful website, processing invoices and issuing CIS statements and then logging it with HMRC and paying tax.

That said, there is no employees NI to pay and the contractor pays their on NI.

I employ a mate and it's difficult sometimes to be fair. There are times when had he not have been a mate, he'd have probably been sacked. I've worked with a lot of mates in the past and it is definitely challenging at times.

I would agree with the others, don't do a split do an hourly or day rate. Make it known that it's your business and you are the boss, otherwise you'll find yourself feeling unable to make some of the judgement calls and decisions.

 

[stevetheplumber]

when i was working with another guy all the time we were both self employed seperately and we alternated who got the cheque and balanced it out as we went along

 

[GasmanxxxR1]

I employ through CIS as a temporary measure, temporary to permanent hopefully. It can be a pain using HMRC's awful website, processing invoices and issuing CIS statements and then logging it with HMRC and paying tax.

That said, there is no employees NI to pay and the contractor pays their on NI.

I employ a mate and it's difficult sometimes to be fair. There are times when had he not have been a mate, he'd have probably been sacked. I've worked with a lot of mates in the past and it is definitely challenging at times.

I would agree with the others, don't do a split do an hourly or day rate. Make it known that it's your business and you are the boss, otherwise you'll find yourself feeling unable to make some of the judgement calls and decisions.

Exact situation Im in, keep getting more and more work and need to share the load. My mate is a good plumber and ive known him 20 years. We BOTH acknowledge that im the level headed one and ive got the quals, im more thoughtful, patient and studious.

My mate is more out going, networking, social media savy ect and a more varied plumbing back ground, he knows the local builders and so on.

Im hoping we compliment each other well and we make a success of this. Maybe in future he will be my employee or even business partner

 

[Nostrum]

Don't get me started on business partnership! Never again.

 

[GasmanxxxR1]

We sat down had an open and honest discussion, he is happy to leave the finances totally in my hands and as long as he can make x a week he will be happy.

 

[cr0ft]

I've spoken to a few people who have been involved in business partnerships and I've yet to find one who tells me in person that they would do it again. If I needed skills I didn't have I would employ them in to be honest as keeping control of my business and shares is very important to me.