Off-Payroll Working in the Public Sector and Its Impact On Schools and Supply Teachers
What you need to know about the changes to Off-Payroll working in the public sector.
- New legislation has made it significantly more difficult for schools to hire temporary workers, including teachers and TAs, that are either self-employed or work through their own limited company
- Schools can now be held liable for any taxes that were underpaid by their self-employed workers
- To minimise risk, schools should ensure that all temporary employees are paid either through the school’s payroll, through an agency payroll, or through an umbrella company.
On April 6th 2017 new legislation called “Off-payroll Working in the Public Sector” came into effect. The legislation can have a material impact on the relationship between schools and their temporary staff.
What has changed?
Under the new legislation, schools are now responsible to pay any National Insurance Contributions (NICs) and deduct Income Tax for any individual deemed to be an “Off-Payroll” employee.
“Off-payroll” is a definition that typically captures teachers that are paid as self-employed or through their own company, often known as a personal service company.
For years it was common for supply teachers to work on a self-employed basis. This arrangement meant it was the teacher’s responsibility, and not the school’s, to pay their NICs and Income Tax.
The new legislation has moved the responsibility for paying the correct tax and NIC to the employer within the Public Sector, and this includes state schools.
How does this impact schools?
Schools who have paid staff on a self-employed basis or through a limited company, for example former teachers who occasionally work on a supply basis, will now have to pay NICs and deduct income tax from that teacher’s pay. This results in an increase of 13.8% (Employer’s National Insurance rate) to the cost for the school as well as additional administrative hassle.
I am a school leader, what should I do now?
To ensure compliance with the new off-payroll rules, and ensure you aren’t met with an unwelcome bill from HMRC in the future, school leaders should ensure all temporary workers (like supply teachers) are paid either through the school’s payroll, through an umbrella company, or through the payroll of a supply agency or other third party. In these 3 instances, the school does not open itself up to any potential liability.
I have been a self-employed supply teacher until now, what should I do?
Unfortunately, it is now significantly more difficult and risky for the school to have self-employed supply teachers or any other self-employed workers. The best alternatives would be to either ask the school to put you on their payroll or to find an umbrella company to manage your payroll.
The “Off-payroll Working in the Public Sector” legislation has forced a change in the relationship between some supply teachers and the schools or agencies they work for. It’s best to understand how the changes affect not just you, but other parties too so you can agree on a new arrangement that leaves you or your school as well-off as possible.
Are you a supply teacher looking for an umbrella company? Would you like to increase your daily earnings?
Or, are you a school wanting to reduce your supply cover costs?
If so, find out how we can achieve both of these scenarios with Zen Educate.