Putting staff on contract work?

bistro

Due to the general public being scared sh1tless lately to spend any monies, im in dire need of reducing costs all over my business.

I need to reduce 2 staff members wages aswell as put them (temporarily) on contract work as a form of saving on 120+ per week prsi contributions im paying.

Ive explained this to the lads and they have no issues. Can this come back and bite me in the ass at a later stage?

Cheers

DubTony

You'll have to let them go first. P45s and all that stuff. Are they with you long enough to be entitled to redundancy?

edit: What sort of business is it? I'm not so sure you could put them on contract work if they're flipping burgers for you.

gnxx

The revenue has a bunch of tests to determine if somebody is an full time employee that should be paying PAYE/PRSI. So for example, if somebody has a desk and phone, only contracts for you ( IE has no other clients ), then they can be deemed an employee. You will get stuck with the tax and PRSI.

Quoted below from the sbpost ( http://archives.tcm.ie/businesspost/2001/02/18/story953909928.asp ).

"Converting an employee to a self-employed contractor is not a cosmetic accounting exercise to save PAYE/PRSI. The contractor must genuinely lose the benefits of employment, and must carry the financial risk of self-employment.

If a contractor is found to be an employee, the employer can be assessed for the PAYE/PRSI he should have deducted from the employee's salary. Revenue may assess the employer by grossing up the payments. There is no basis in law for this approach unless there was an agreement between the employer and the employee that the employee be paid tax-free."

jhegarty

bistro wrote: »

Ive explained this to the lads and they have no issues.

I suspect that's because they don't understand the tax and paper work implications of what you suggested.

unnameduser

Agreed,

Do they realise that they will have to prepare their own accounts and submit invoices for work done?