Advice - General / Shift payments - tax and time off
Some freelances working shifts have found themselves "taxed at source" - that is, Income Tax and National Insurance are deducted from their fees as if they were employed staff.
One advantage of self-employed status is that business expenses can be claimed as costs against gross income, reducing taxable income and therefore increasing after-tax income. Another advantage is simply that self-employed status means the freelance pays the tax later - which is considerably less burdensome if they are getting started, or in general if their income is increasing.
Maintaining self-employed status may also have implications for copyright ownership: see Rights and why they are important.
Broadly speaking, freelances who work for several clients in the course of each year usually meet the definition of self-employment and are entitled to be paid the full fee for each shift, settling up Income Tax and National Insurance later. See Employment status for a slightly more detailed discussion of when you are employed and when you are self-employed.
Periodically, however, the Inland Revenue visits publishers and broadcasters to encourage them to put everyone on Pay-As-You-Earn (PAYE). This means the Revenue gets the money much earlier, and they seem to believe it will save them collection costs.
The "IR35" rule is part of this push. It aims to bring some freelances who invoice as a company or partnership, not as a "natural person", into the PAYE orbit. See below, and Setting up a company.
The Revenue threatens companies that if they engage someone as self-employed when they should have been on PAYE, the company may be liable for retroactive tax payments. Frequently, however, a patient explanation after such a visit can get freelances who work shifts, and should be treated as self-employed, back to being paid gross.
Some clients claim that their computer systems simply refuse to recognise the existence of freelances. Public educational institutions seem to be particularly fond of this. Remind them that if they can manage to pay plumbers and buy tea, they can pay you.
Freelance journalists who wish to argue that they are independent providers of services can appeal against Income Tax and National Insurance being deducted from their payments on a PAYE basis. The NUJ Freelance Office has a model letter for NUJ members, adaptable to individual circumstances, to be sent to the relevant tax office.
Paid time off
The thrust of European Union labour rights law is to grant rights to "workers" regardless of their formal employment status. The major practical effect of this in the UK - so far - is that every freelance who works shifts is entitled to paid time off. This is not, strictly, "holiday pay". It comes under EU Health and Safety legislation intended to ensure that all workers do in fact take time off - and get paid for it.
European Union legislation continues to apply in the UK until at least the end of December 2020.
All workers are entitled to 28 days' paid time off per year when they work a five-day week, and pro rata. So if a freelance works one day a week for a particular client, that client must pay them for 5.6 days off per year.
Being on PAYE is not a requirement - you merely have to be "a worker" paid by the day, rather than a supplier paid by the word or the picture.
Many publishers and broadcasters have now made this routine and automatically pay up, for example at the end of the year. Some pay it at the same time as they pay for days worked; this is legal so long as the paid time off is clearly itemised.
Any freelance NUJ member who has difficulty getting this paid time off should contact the Freelance Office.
The regulations also give all workers the right to a rest period during a shift. They stipulate a minimum rest period between the end of one shift and the beginning of the next.
There is a campaign to get benefits such as paid parental leave extended to all workers. It has not yet borne fruit.
And there’s less...
Some freelances believe that if they work daily shifts on a casual basis they acquire the right to be offered a staff job after a year's service. This is an urban legend. It is false.
It appears, however, to be an urban legend that is believed by some clients, which make a point of dropping such "casuals" after 51 weeks. Someone who works in this way may acquire protection from unfair dismissal or the possibility of negotiating compensation for "redundancy" - but neither is at all the same thing as being offered a job.
Incorporation and partnerships
Some freelance journalists have "incorporated" - formed limited companies - or set up partnerships. (See Setting up a company.) Doing so does not necessarily imply that they should be paid gross: the Inland Revenue obtained the notorious "IR35" rule precisely to ensure that they can charge such companies income tax.
The UK government is progressively tightening this rule. A move to make more companies responsible for categorising contract workers scared many companies into terminating those contracts in early 2020 - even though the move was postponed until April 2021.
Contrariwise, at least one trade union researcher (not working for the NUJ) believes that such companies are entitled to paid time off. We are not aware, however, that this has yet been tested.
Text © Mike Holderness & previous contributors; Moral rights asserted. The collection (database right) © National Union of Journalists. Comments to email@example.com please. You may find the glossary helpful.
The National Union of Journalists must not, can not and would not wish to dictate rates or terms of engagement to members or to editors. The information presented here is for guidance and as an aid to equitable negotiation only.
Suggestions apply to contracts governed by UK law only. In any event, nothing here should be construed as legal advice.