Q: My Client is working for a Public Sector Body through their own personal service company. They are caught under the Off-Payroll Working Rules and need to have an operation in the near future, will the Fee-Payer be responsible for the payment of any Statutory Sick Pay my client is entitled to?

 

A: No, while the Off-Payroll Working Rules introduced a requirement on the Fee-Payer to deduct PAYE and National Insurance from the deemed direct earnings the legislation doesn’t make the Fee-Payer liable to statutory payments. Therefore, any liability to statutory payments would remain with the individuals Personal Service Company (PSC).

Under the Off-Payroll Working Rules amendments were introduced to the Social Security (Intermediaries) Regulations 2000 and the Income Tax (Earnings and Pensions) Act 2003. The changes added additional requirements to the Person (Company, Partnership, other intermediary and in certain cases the Public Sector Body) making contractual payments to the PSC, the Fee-Payer.

If the Public Sector Body believes the individual would be an employee if they worked for the Public Sector Body directly, then the Fee-Payer becomes responsible for the operation of Income Tax and National Insurance on the deemed direct earnings as though the individual were their employee.

However, under Sections 151 and 163 of the Social Security Contributions and Benefits Act 1992, the Fee-Payer will only be liable to make statutory sick payments to Employee’s with a Contract of Service with the Employer. As the individuals do not have a Contract of Service with the Fee-Payer the individual will not be eligible to receive statutory sick pay and the liability to calculate any entitlement and payments due will remain with the individuals PSC.

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