Local Councils as Employers - Employment Status of Clerk

COUNTY DURHAM ASSOCIATION OF LOCAL COUNCILS

BEST PRACTICE GUIDE :

EMPLOYMENT STATUS OF CLERK



1. The Council has a duty to protect the public interest, and, as an employer, has a duty of care to its employees. The Council should have a written contract in place for each employee and for each person/body providing a service. The SLCC and NALC both advise that the Clerk, as Proper Officer of the Council, is an employee of the Council and should be employed on a contract of employment. This guide explores the reasoning for this against the risk to the Council of contracting with the Clerk on a contract for services.

2. Each employment has a distinct status and it is the responsibility of the employer to establish, via internal requirements and those of HM Revenue and Customs, the employment status of each individual who works for them. The appendix will help an employer make that distinction. In applying these tests it is quite clear that the Clerk is a direct employee and therefore subject to a contract of employment. It is irrelevant that the Clerk is self employed in his/her work in another capacity.

3. It is important that the Council’s Proper Officer is in a position to be directed by the Council and in full control of the administration of the Council. There may be a risk to the Council if this is not the case.

4. An employer is liable for NIC on the salary of its paid employees. It may also be liable for unpaid NIC and income tax of those who are on contracts for services. This is a risk that the Council needs to take into account.

5. NIC is payable by the employer for earnings above £87 per week or £377 per month or £4,524 per annum. Therefore, for most small Councils who pay their clerk less than the above amount there will be no employers national insurance liability. However the following should be borne in mind. It is recommended to ensure that you adhere to the above threshholds as, for example, if you pay your clerk £1,200 per annum and pay this in two half yearly sums i.e £600 in September and March, both of these payments would incur employers national insurance contributions as they exceed the £377 monthly threshold. However, paying the same amount in monthly (£100) or bi monthly (£200) sums would avoid employers national insurance as these monthly payments do not exceed the thresholds.

6. Income tax is payable by the employee on the aggregate of the income from all employment above the personal allowance via the employer’s PAYE system. Where a Clerk works elsewhere, the Clerk can arrange for his/her income tax on earnings with the Council to be taken into account, so that a Council need not run a PAYE system. However, a P46 is required for the Council’s file for the Council’s protection.

7. The Internal Auditor is required to test the Council on its PAYE and NIC arrangements for the completion of section 4 of the Annual Return.

8. The Clerk is the Council’s adviser as well as Head of Paid Services, and should advise the Council to arrange its affairs in the public interest – NOT in the Clerk’s interests. It is quite irrelevant that the Clerk may be self employed elsewhere. The Council has liabilities and these liabilities should be minimised.

9. In the light of the above, there is no merit in the Council employing a Clerk on a contract for services basis. Indeed, the Council will be at risk. HM Revenue and Customs will not be squeamish about claiming unpaid income tax or NIC from an employer – even a Parish Council!

10. It is for the Parish Council – not the Chairman, not the Clerk – to be satisfied that proper contractual arrangements are in place, and that NIC and income tax is paid where required.

APPENDIX
Extract from Inland Revenue Business Series Leaflet IR56 April 1999

The law doesn't define "employment" and "self-employment". You or your Employer can't simply call your job ""employment" or "self-employment".

The questions below should help you to decide your employment status.

Employed
If you can answer "Yes" to the following questions you are probably employed.
• Do you yourself have to do the work rather than hire someone else to do it for you?
• Can someone tell you at any time what to do or when and how to do it?
• Are you paid by the hour, week or month? Can you get overtime pay?
• Do you work set hours, or a given number of hours a week or month?
• Do you work at the premises of the person you work for, or at a place or places s/he decides?

Self-employed
If you can answer "Yes" to the following questions you are probably self-employed.
• Do you have the final say in how the business is run?
• Do you risk your own money in the business?
• Are you responsible for meeting the losses as well as taking the profits?
• Do you provide the main items of equipment you need to do your job, not just the small tools many employees provide for themselves?
• Are you free to hire other people on your own terms to do the work you have taken on? Do you pay them out of your own pocket?
• Do you have to correct unsatisfactory work in you own time and at your own expense?

The same considerations to determine employment status will apply even if you work part-time or for a short period. Unless you can answer "Yes" to the self-employed questions you will normally be an employee.

To assist in this process and to ensure tha National Arrangements are adopted for your Clerks employment, the County Association can, upon request, supply details of

National Agreement on Salaries and Conditions of Service of Local Council Clerks in England and Wales 2004

Guide to Good Employment Practice in Local Councils

Model contract of employment

Model job description and

Clerks salary scales 2006/07 (still subject to negotiation for April 2007 increase)

Please phone Steve Ragg on 0191 3833827 or e mail cdalc@durham.gov.uk for further information.