Engaging self employed individuals or independent contractors
The University is committed to ensuring that all members of its workforce are engaged on the most appropriate contract and that this engagement is completed in a transparent and fair way.
The University engages self employed individuals or independent contractor through an agreement for services. An agreement for services is generally used for independent consultancy/contracting but only where the contractor is genuinely in business on their own behalf, and the business relates to the activity being undertaken. There should be no indication of an "employment type" relationship existing in the work delivered.
In accordance with the University of Sheffield's Agreement for Services, the contractor is engaged to provide specific, defined (and often 'one-off' services). A set fee will be payable for the services, and the contractor is responsible for settling their own tax and National Insurance directly with the HMRC.
Before engaging an individual to undertake work within the University, please use the payment decision tree. This tool has been develop to support you to determine the appropriate contract of employment and method of payment for services delivered to the University by an individual, or individuals, acting in their own right or employees of an organisation or business.
Understanding employment status
Before engaging a self employed individual or independent contractor, it is important to understand their employment status.
For a contract of employment (employee status) to exist, three key elements must be present:
- the individual must be under an obligation to perform the work personally;
- there must be “mutuality of obligation” between the parties; and
- the employer must have sufficient rights of control over the employee.
These 3 elements (above) should not be present for the engagement of a self employed individual or independent contractor;
- the individual/independent contractor may sub-contract the work or send a substitute to undertake the work, if the University were satisfied that they were capable/qualified to undertake the work;
- the individual/independent contractor could choose to accept or decline any offer of work;
- the individual/independent contractor would control what, how (means and methods), when and where the work is performed.
Should you have any queries about employment status, please contact your Faculty HR Team Contact.
Employment summary for a self employed individual or independent contractor
Key features of the relationship
Someone who is not an employee and is an independent, self-employed contractor works more independently of control, possibly including:
- determining the activities/the way in which the services are carried out, including when/where/how to do work
- rectifying sub-standard work at their own expense
- providing own equipment, tools, resources, etc
- if allowed by the department, hiring and paying (ie subcontracting) others to undertake /assist with the work
- having other clients.
The integration of an self employed individual/independent contractor into University life should be limited to the extent necessary to be able to fulfil specific work requirements.
Under revised HMRC IR35/Off Payroll working regulations, if an individual delivers a service through their Personal Services Company and the University deems that an "employment type" relationship* exists, the University is required to deduct tax and National Insurance from that individual at source. In these circumstances, the University will therefore engage and pay the individual as a casual worker or employee. This means that other employment rights and obligations will apply.
*An "employment type" relationship exists when a person performs work or services under certain conditions in return for remuneration.
|Employment rights and statutory obligations
Principal individual rights associated with contract: Genuinely self-employed individuals cannot have the rights on List B or C (unless their employment status changes). See Employment rights summary.
If a self-employed individual is clearly in business on their own account and is not sub-contracting the work, some List A rights may apply, such as the right not to be discriminated against, but they may lose some of the other rights such as the National Minimum Wage, Working Time Regulations, Part-time Workers regulations and the Public Interest Disclosure Act protection.
University statutory obligations
Pre-placement Checks: Criminal record checks should carried out when the individual will be working with vulnerable adults or children. Human Resources will process the application with the individual upon request (checks to be paid for by the department).
Reasonable adjustments: Where a self-employed individual discloses a disability to the University, it will be the responsibility of the University to seek to accommodate any reasonable adjustments to enable the individual to undertake the work.
Health & Safety: The department is required to ensure that all appropriate health & safety requirements are met. These will vary depending upon the nature of the work. Activities should be risk assessed by departments.
|Authorisation of engagement
Recruitment process: Recruitment processes do not apply. Please refer to the Procurement Office for further guidance on the appointment of self-employed/independent contractors to ensure appropriate financial directives are applied.
Financial authorisation: Follows the MyPurchase process. Requires prior approval by the Head of Department.
Responsibility for administration/record keeping: Pro-forma Agreement for the Provision of Services is generated by the contracting department. Departments retain records including agreement and details of invoices / payments. Responsibility of the contractor to submit invoices in accordance with the agreement.
Work allocation: Depending upon the nature of the contract, the individual may wish/be able to delegate some or all of the work as they see fit – needs to be specified in the specific terms of this agreement.
Pay and grading: Individually negotiated fee. Payment made via MyPurchase process.
The Agreement for Services document will have a schedule within which the department will set out the fee structure following negotiations with the individual involved. This will be dependent upon how the contract is worded, for example this may be a lump sum payable at the end of the assignment, or periodically, upon submission of an invoice.
Payment process: A (gross) fee is payable via General Ledger based on the submission of invoice(s). The Agreement for Services document provides for payment in accordance with the terms of the schedule.
Tax treatment: A self-employed person is responsible for accounting to HMRC for their own income tax and National Insurance (and for VAT where appropriate). Consideration should be given as to whether the price paid is VAT inclusive or plus VAT. If VAT is charged, the University should be given a VAT invoice. It is recommended that the paragraph relating to VAT within the pro-forma template is used, to protect departments from any retrospective VAT claims for the contractor.
Staff benefits: Not eligible.
UCard Allocation: External UCard for building access.
Induction: Refer to Worker Induction Checklist for suggested minimum.
Development and training: Not eligible.
|Engaging self employed individuals or independent contractors
Engaging self employed individuals or independent contractors
Under revised HMRC IR35/Off Payroll working regulations, if an individual delivers a service through their Personal Services Company and the University deems that an "employment type" relationship exists, the University is required to deduct tax and National Insurance from that individual at source. In these circumstances, the University will therefore engage and pay the individual as a casual worker or employee. This means that other employment rights and obligations will apply.
Agreement for services
Agreement for services can only be issued when an individual is identified as a genuine self employed contractor, and when the nature of the business directly relates to the service being undertaken for the University. Individuals engaged on an agreement for services should not be paid via the University payroll, and services will be paid for upon production of invoices by the contractor.
Please note that an agreement for services connected to a research project should be generated, negotiated and signed by Research & Innovation Services, please contact the Pricing & Contracts Team for more information.
Visit the agreement for services web page for further information.
Guidance on how to use an agreement for services template is also available.