[madge]

I currently run my own small cleaning business (sole trader) cleaning a few houses a week.
I have the possibility of being offered a contract to clean another 50 residential properties on a fortnightly basis which could be expanded to 100 residential properties depending on how I go with the first 50.

I would love to expand my business and take on this contract but obviously this will require me to take on extra staff.
I have been looking for days and days on the internet at the complication of taking on employees and it seems so daunting, holiday pay, sick pay, redundancies, PAYE, NIC (1,2,3 etc)... the list goes on and on!

I really don't want to be spending my time filling in forms, sending off payments to HMRC if I can help it and I can't possibly see how I could afford to pay someone for a holiday or been off sick let alone giving them any redundancy money - not that I wouldn't want to I just don't see where the cash would come from?

Having said this, there does seem to be some ways around the things I have mentioned above and I would like the advice of anyone reading on these as to whether they could see any problems with them.

Basically, I would need... to cover 48 residential properties in a week, 6 cleaners, each cleaner spending 2hrs per property, 2 properties a day, 4 days a week to cover the contract.
1 cleaner x 2properties/a day = 4hrs a day (p/t) - 4 days a week = 16hrs a week
The rate of pay per cleaner would be £6.80 giving a weekly total of £108.80 a week.

It seem the best idea to avoid having all the hassle that comes with PAYE and NIC would be to keep each cleaners weekly wage below the threshold for making PAYE and NIC contributions to HMRC which is currently £110 for tax year 2009/10

Great thats that out of the way, hopefully! All I need to do is keep a record of what I have paid each cleaner and their name and address right?

So if anyone else can shed any more light on subject 1 above or can see any pitfalls your comments are very much welcom.

OK Subject 2

Holiday pay, sick pay redundancies etc etc...

It seems that the only way to avoid all the complications that come with an employee or taking someone on the books is to have them as a sub-contracted cleaner.

Having read many things on the internet this would obviously need a seperate kind of contract drawing up with the prospective sub-contractor 'Contract of Service' if I remember rightly!

So the BIG QUESTION is: Would it be ok to operate like this? By this I mean can anyone see any problems with setting on 6 cleaners as sub-contracter cleaners and paying each one of them less than the threshold for PAYE and NIC contributions?

Is there anything else I have missed that I would also need to do?

[Robert Parry]

Anyone who runs a legimate business has all these expenses to contend with and more, I fail to see why you would consider yourself a special case!

Anyone, who circumvents these rules is operating outside of the law, and sooner or later, you will pay the price, with government tax receipts in the toilet, the good old Revenue and Customs, will be far more aggresive in any investigations, the penaltlies for non complience are severe, especially as a sole trader!

You could, as you suggest, sub this work out, however, there are very strict rules regarding this, you would be well advised to avail yourself of professional advice in this matter.

Regards,

Rob

[Pristine Clean]

Thats alot of questions.

Yes you can operate that way. Sub - contract the cleaners. However this does not mean that you wont be liable for any redundancy at a later stage.

After a while if the subbies have worked for you after a set period continually employment law regards them as employed by you.

I would recomend PAYE, get a good accountant that will do the payroll for you. They will complete most things. All you need is a p46/p45 sent off to your pay roll. with bank details and they sort it. They deduct all the stuff that needs to go to hmrc.

You might be better off with employing less cleaners and  giving 1 or 2 of them more hours and that way you will get someone worthwhile (hopefully)

Sick pay contractual sick pay whats in the contract does not need to be paid but SSP does. This will then stop them taking time off if they have cold or sdore throat.

Redundancy dont panic they have to be employed for 2 years before they get any and thats only a weeks pay for every year. A week and a half depending on age. - large companies dismiss employees and remploy them under a different contract so they get out of redundancy.

As for paying for all the deductions NI, holiday etc your price you quote will cover for all of that. So it does not actually come out of your pocket.

Expanding is daunting at first. We have about 25 cleaners now. We also use many temp staff from agencies.

Dave

Best of luck with it.
 

[dianegreenwood]

Hi Madge

For domestic cleaning, I would recommend you add 20 to 25% to the wage to account for holiday pay, mileage allowances, etc, so if you pay them £6.80 you will actually be paying them about £8.50 per hour.

Then allow another £1 per hour for cleaning equipment, materials, uniforms, premises, admin expenses, your time & petrol, etc and you have your breakeven. 

= £9.50 per hour.

Managing 6 people (and 48 customers) will involve a lot of your time washing cloths, spot checking, rescheduling, lots of paperwork, payroll, book-keeping, managing cashflow, etc so I would roster yourself out asap and make sure your hourly profit per hour reflects what you want to earn.  If you are rostered out it will also make it much easier for you to cover if someone is off sick (which they will be!)

i.e. 96 hours @ say £13 per hour gives you approx £336 per week Net Profit.  Is that enough for you?  If not, then your hourly rate needs to be higher.

Hope that helps rather than confuses!

I also agree with Dave that you are probably better with less cleaners working more hours each.  It will cost you in employers NI but in my experience if you offer a decent number of hours per week you get much better people and of course its less for you to manage!

Cheers

Diane

www.freshlymaid.co.uk

[madge]

Thank you very much for your prompt replies

Robert Parry, Pristine Clean and Dianegreenwood - very informative and well worth thinking about.

Just like to say to Robert though that I do not consider myself as a special case I was merely asking if there was an easier way to do things without all the complications.

I don't plan on circumventing any rules or working outside the law. Everything I mentioned was legitimate things I had picked up from searching the internet over the last few days.

I didn't see anything outside the law in employing someone for less than the threshold of £110 to avoid PAYE and NIC when these are clearly set out as the law.

I was trying to establish why it would not be better to employ 6 cleaners under £110 and have no paperwork hassle than employ 3 cleaners at £220 a week and have to do the paperwork!

Pristine Clean your reply was very reassuring

Diane I think I will have to read yours agian to get my head round it but thank you very much.

[Pristine Clean]

Diane has broke it down for you.

But basically although you pay you cleaners around £8.50 mark inc ni etc. You are billing the customers are being billed an hourly rate of around £13.00ph. this includes your profit.

Do you have any employees at present? 


Dave

[cml]

Hi Madge, the key points here is that if you are trying to expand your business you need to consider if you are committed to doing it and whether it is worth your while.
If you want to expand your business and do not have the capacity to do it then the  only answer is to employ staff and by doing so all legitimate businesses  sole trader or otherwise have to comply with the laws surrounding employment.
If the contract does not allow you to incorporate additional expenses to take on staff to cover things such as holiday pay, etc., then the contract is not worth your time and effort unless you can find a way to complete all works by yourself. There does not appear to be enough to even outsource the payroll.

I deduce that it is the HMRC aspect that you are trying to avoid.  No matter how daunting it is, it is  a course of the business world and something you would need to comply with.  As for subcontracting yes this is an avenue you could consider but it is not as straight forward as you think.  Questions you might want to consider is whether  the cleaner you employment really wants to bother with the possibility of submitting self assessments to the tax office, keeping their own accounts etc.  Most cleaners just want to go to work without any hassle, get paid and go home.  Then you need to consider whether they will be classed as an independent contractor when you control the work that they do.   Without going into too much and confuse matters further..................the hassle you are running away from will still come along with managing those staff, H&S, Insurance, etc, etc, etc.,   It just not that straight forward.   Maybe you may want to consider giving this contract a miss if you truely cannot do it yourself nor want the added responsibility of employing and managing additional staff if the profit margins are very low.

I hope this helps

[madge]

Thanks Dave, No employees at present!

Thank you also cml

cml with regards to... quote "Questions you might want to consider is whether  the cleaner you employ really wants to bother with the possibility of submitting self assessments to the tax office"

This is where I was confused!!!

If the cleaner was being paid under the threshold of PAYE and NIC currently £110 a week or £6475 personal allowance per year then for some strange reason I assumed they would not have to bother with self-assessment... Silly me!

I think, like most of you suggest that working out the actual cost + a little profit is the best thing and submitting this to the person offering the contract to me. If they don't like it they will have to go elsewhere.

Thank you all for your help!

[Pristine Clean]

Also dont forget the cleaners may do the £110 to stay under the threshold in your company. But if they also work at another company.. then you will still have to take the NI and other contributions into account.


Dave

[madge]

Pristine Clean (Dave),

Do you have any info or recommend any sites for this that you mentioned...

Quote: "Sick pay contractual sick pay whats in the contract does not need to be paid but SSP does. This will then stop them taking time off if they have cold or sdore throat".

Many thanks!

[Nick Head]

Hi Madge

Some good advice on here - my advice if you employ staff folow the rules and keep it simply - HMRC can make life very difficult if you dont.

This may be stating the obvious - apologies if you have already thought of this or I have missed something - but how are you going to fund this expansion? £652.80 per week in labour costs - I take it that you will be on normal business terms of payment within 30 days? Even if you invoice weekly you will be funding at least £3250 in labour costs alone. Hope this does not offend just thought I would mention it.

One other thing I was lucky when I started I was able to speak to my local tax inspector and his advice was invaluable - maybe worth contacting your local tax office to see if they will give advice - possibly not but worth asking.

Nick

[gordonswindows]

Well done Nick best bit of advice I have read for ages

The other posters were spot on with their advice and this is why we all need the forum

But Nicks comment of contacting the tax office is spot on, they are an invaluable source of knowledge and experience

I always ask the question, if your lights fuse who do you call? an electrician, if your car breaks down you get a mechanic so if you have tax questions talk to the taxman.

My tuppenceworth on the staffing issue would be to employ as many as you need on the 16 hours.As you point out you avoid the paye but more importantly you gain flexability

6 staff on 16 hours  alows you to have two off sick and still manage, you just need to flex up the hours whereas 3 staff on full-time at 30 hours or more means one off and you struggle. Also it is harder to find a diamond in a little pool of people but if you have a bigger pool more chance you will find the diamond, why a diamond? well it is they who will become the team leader, the one you can trust the one who runs the contract day to day while you go out and win more and more work

Don't allow the thought of failure put you off as it is always worthwhie to try. If it doesn't work just think of the experience you will have gained which will make you better prepared next time..........

Yes I know it is scary, yes I know it is hard work, yes I know that many of us moan about employing people but you know deep down inside what kind of person you are and whether you want to go for it or not

You already rely upon yourself, you are already a success, you alreay have a business and you already know you want more more more and hey there is nothing wrong with that, what you are really asking is Can I do this?

Yes Yes Yes you can.

Ask advice, seek opinion then look in the mirror take a deep breath and say to yourself yes I can do this.

Go get them and good luck

Gordon

[madge]

Thanks for your advice Nick Head no offence taken - Good solid advice!

Gordon...

Wow! Have you ever thought of becoming a psychotherapist? You could earn a fortune!

I feel like Million dollars already just ready your post. Brilliant advice from all of you!

My plan of action is to use some of the advice in this post work out costs plus profit and submit this to the peopler offering me the initial contract. Should they accept then it will be a call to HMRC and the accountants.

Thank you all again it's great to know that people are willing help others out for free and it's great to get the opinions of several different people.

[Pristine Clean]

As you are being offered to quote for a contract.

Do they have cleaning staff already on site, ie in house or contracted?

If so you need to know about TUPE as these people will possibly become your employees,

You need to consider what they are being paid, their T&Cs as this cannot be changed by you without being awkward.

and a mistake could cost you dearly

Dave

[Anna Warren]

Very interesting topic. I just wrote similar one, but I read it as well . Lots of really good advise, thank you.

[Kris McCulloch]

This is a good thread.  I also looked at doing this Madge, and I'm still convinced it will work for a number of reasons.  It's not acting illegally in any way.  It's using the rules to ones advantage.  I also like the idea of spreading the work out helping to deal with illness etc.

Kris

[BDCS]

I'm still a one man band which has great limitations but when i started someone said to me "think like a big company". this did'nt make much sense at first but as time goes by it becomes clearer. If you start by charging enough then you cover these costs from the start and when you actually need to cover them it is'nt so much of a hurdle.

[Kris McCulloch]

Which is a fantastic point.  But why pay costs you dont need to?

It just eats into profits.

Kris

[Paul Heath]

Very intersting post, just out of interest we use http://www.moneysoft.co.uk/pm_intro.htm for our payroll. Its £55 for the year for up to 20 staff. It does everything for you and once you got your head round it, very straight forward to operate. Would recommend it, like i said we have used it for the last 3 years, and would not use anything else. Accountants charge a lot more than £55. for the year to do your payroll.

[martin19842]

hi there

if you are employing at 16 hours a week, and the employee has another job, and many do then the employee will end up paying tax at both jobs, therefore the easy life isnt avoided.

contracting individuals on a sub contract self employed basis also has its issues, as the HMRC do take a dim view on this.

the blunt fact is that if you are running a business then you will have to pay all the relevant taxes etc, whether that be through PAYE, self assessment or corporation tax.

dont be afraid of this requirement, the more tax that you pay the more money you are earning. 

you need to gain as much loyalty from employees as possible and therefore if you employed them for more hours then you stand a better chance of getting that loyalty.


regards
martin