How to Keep Consultants From Turning Into Employees
- Never make a payment via payroll. Instead, the payment needs to go on a production of invoices. In addition, do not set a salary for the consultant. The payment should be a negotiated rate for the work completed. In addition, the consultant needs to take care of their own taxes.
- Set up a consultancy agreement; this document should go over what the relationship between the two parties is going to be. Do not fall into the trap of believing that you only have to write down that the consultant is not one of your employees. Cover all of your bases and make sure that a consultancy agreement is in place before any work begins.
- Give the consultant flexibility. They should be able to choose their hours. They should be able to determine what they want to do and when they want to do it. Furthermore, it may be best to have one of their colleagues monitor their work rather than someone in a managerial position. Look at this post from Capita IT Resourcing.
- Have the consultant go through a limited company. Doing so means that there is not a direct contractual relationship existing between the consultant and the client. In addition, the client can take advantage of IR35 legislation. This means that the consultant company has to take care of income tax as well as national insurance contributions should the consultant be regarded as an employee for tax reasons.
- Do not use one consultant on a continuous basis. You should always work with someone on a particular project or task and then come back at a later date. In addition, make sure the consultant knows that he or she can take on other work.
- The consultant should be in charge of finding a substitute to do the work. Give the individual flexibility in this area as well. You may want to outline acceptable substitutes in the consultancy agreement.
- A consultant should not have an email address provided by the company. They should not have business cards with the company name on them.
- Consultants should not be given company supplies or equipment. For example, the consultant should bring in his or her own computer.
- Go over your agreement every three or four months to ascertain if the individual is still considered a consultant.
- If the consultant is absent from work due to illness or because they go on vacation, they should not get paid. However, make sure that the consultant is not deemed to be a “worker;” if so, he or she may have to receive these benefits.
