Legal obligations of being an employer
Becoming an employer for the first time can be daunting. The Government has produced some useful guidance for PCCs employing staff for the first time. ACAS has a Guide for New Employers which gives an overview, while the ACAS website has useful template letters, forms and policies and Acas code of practice on all aspects of employment.
ACAS has also produced generic workplace advice for employees and employers on:
- Coronavirus (COVID-19): advice for employers and employees;
- TUPE transfers;
- Working from home;
- Employment contracts;
- Pay and wages;
- Holiday, sickness and leave;
- Health and wellbeing;
- Lay-offs and short-time working;
- Working hours;
- Job applications and hiring;
- Dealing with workplace problems;
- Maternity, paternity & adoption leave and pay;
- Disciplinary and grievance procedures.
You will need to register with HM Revenue & Customs (HMRC) as an employer and can do this up to four weeks before you pay your new staff. Alternatively, you may wish to use an outsourced payroll agency. Employer’s liability insurance will need to be arranged as soon as you become an employer.
Pay and benefits
By law, you must pay a minimum amount on average for the hours worked. This is called the National Living Wage (NLW) for those aged 23 or over and the National Minimum Wage (NMW) for those of at least school leaving age. The NMW is dependant on the age of the individual and there is a separate rate for an apprentice.
The diocese promotes the ‘real living wage’ rates – at the moment this is £9.90 per hour from 15th November 2021 in the UK and £11.05 per hour in London. Employers should implement this rise as soon as possible and at the latest by 15th May 2022. The NLW and NMW are the legally enforceable minimum level of pay whereas the real living wage is an informal benchmark, so differs from the national living wage rate.
You must ensure pay between similar employees is consistent. If you offer other benefits then you need to be clear about whether these are to form part of the employment contract or not. If they do, it will be hard to vary or remove them. There could also be potential tax implications if you offer generous benefits. The government website has useful advice on this.
Employer-provided living accommodation – taxation rules
For general information on the tax arrangements, see gov.uk/expenses-and-benefits-accommodation.
Removal of HMRC concession for ‘Representative Occupiers’
PCCs need to be aware of an HMRC ruling that may affect long-standing church workers living in PCC provided accommodation. HMRC announced in March 2020 that the treatment of individuals provided with living accommodation as ‘representative occupiers’ had been identified as an Extra Statutory Concession (ESC) and the government decided to withdraw the ESC with effect from 6 April 2021. If you provide accommodation to your employees under this concession you must make the necessary contractual changes now. A ‘representative occupier’ relates to posts that existed before 6 April 1977 where an employee:
- resides in living accommodation provided rent-free by the employer
- who, as a condition of the contract of employment, is required to reside in that particular living accommodation and is not allowed to reside anywhere else
- occupies the house for the purpose of the employer, the nature of the employment being such that the employee is reasonably required to reside in it for the better and more effective performance of the duties
The representative occupier ESC does not extend to retired employees under Employer-financed retirement benefit schemes (EFRBS) legislation. If you have provided living accommodation to a retired employee under the representative occupier ESC, the prescribed or responsible person (Employment Income Manual) must report this benefit to HMRC by 7 July following the end of the tax year. You need to give your employee a written statement of employment if you’re employing someone for more than one month.
Equality Act 2010, Dignity at Work, Working Time Regulations, Contractual Obligations, National Living Wage, Real Living Wage
Employees have a number of statutory rights:
- 5.6 weeks annual leave (pro rata);
- A maximum working week of no more than 48 hours on average;
- Statutory Sick Pay (SSP);
- Fair treatment and a ‘reasonable period of notice’ if dismissed;
- An ability to raise complaints and have these treated fairly;
- Receive at least the National Minimum Wage (NMW);
- Maternity, paternity or shared parental leave;
- A safe and healthy workplace;
- To not be discriminated against.
The employee’s length of service that determines their statutory rights. Acas has a useful resource setting out the various rights and responsibilities at work. This includes details of the Equality Act 2010, under which it is unlawful to discriminate against people at work because of nine areas termed in the legislation as protected characteristics:
This Act protects employees of all ages but remains the only protected characteristic that allows employers to justify direct discrimination, i.e. if an employer can demonstrate that to apply different treatment because of someone’s age constitutes a proportionate means of meeting a legitimate aim, then no discrimination will have taken place.
This Act states that it is unfair to treat a disabled person unfavourably because of something connected with their disability. An example of this would be a tendency to make spelling mistakes arising from dyslexia.
Indirect discrimination also covers disabled people, which means that a job applicant could claim that a particular rule or requirement disadvantages people with that disability. The Act also includes a provision making it unlawful (with limited exceptions, for employers to ask about a candidate’s health before offering them the job).
This Act states it is discriminatory to treat people who propose to start to or have completed a process to change their genderless favourably, for example, because they are absent from work for this reason.
Marriage and civil partnership
This Act protects employees who are married or in a civil partnership. Single people are not protected by the legislation against discrimination.
Pregnancy and maternity
This Act protects women against discrimination because they are pregnant or have given birth.
This Act protects people against discrimination on the grounds of their race, which includes colour, nationality, ethnic or national origin.
Religion or belief
This Act protects people against discrimination on the grounds of their religion or their belief, including a lack of any belief.
This Act protects both men and women against discrimination on the grounds of their sex, for example paying women less than men for doing the same job.
This Act protects bisexual, gay, heterosexual and lesbian people from discrimination on the grounds of their sexual orientation.
Under this legislation employers need to be aware of the seven different types of discrimination. These are:
- Direct discrimination – where someone is treated less favourably than another person because of a protected characteristic;
- Associative discrimination – this is direct discrimination against someone because they are associated with another person who possesses a protected characteristic’
- Discrimination by perception – this is direct discrimination against someone because others think that they possess a particular protected characteristic. They do not necessarily have to possess the characteristic, just be perceived to;
- Indirect discrimination – this can occur when you have a rule or policy that applies to everyone but disadvantages a person with a particular protected characteristic;
- Harassment – this is behaviour that is deemed offensive by the recipient. Employees can now complain of the behaviour they find offensive even if it is not directed at them;
- Third-Party Harassment – the Equality Act makes employers potentially liable for harassment of our employees by people (third parties) who are not employees (e.g. contractors or external trainers and can also include students);
- Victimisation – this occurs when someone is treated badly because they have made or supported a complaint or grievance under this legislation.
Further guidance on the Equality Act 2010 can be found on the gov.uk website. If you have five or more employees you must have a written health and safety policy. There are also other steps that you may be required to undertake according to the Health and Safety Executive body (HSE). The HSE have produced this helpful Health and Safety Guide, which includes a template policy.
Each PCC as an employer must ensure that it complies with not only statutory requirements but its own financial management procedures and arrangements. The diocese does not provide a payroll service to PCCs. Many parishes use an organisation called Stewardship and you may wish to approach them if you do not have anything set up (other bureaux are available), you can find their details here. The Parish Resources site has advice on paying people.
The ACAS guide to pay and wages is here. More resources are available on the gov.uk site. There is a Special Religious Centre exemption scheme that allows organists and other church employees to be paid gross pay without having PAYE deducted (so long as the parish do not employ anyone else by PAYE and the individual sum doesn’t exceed the PAYE threshold).
There is now a requirement for all employers to automatically enrol certain members of their workforce into a pension scheme and make a contribution towards it. Even if you already have a scheme, you will still have some new obligations to meet. You will need to:
- Provide a qualifying scheme for your employees;
- Automatically enrol all eligible employees into the scheme;
- Pay employer contributions for eligible employees in the scheme;
- Tell all eligible employees that they have been automatically enrolled and they have the right to opt-out if they want to;
- Register with the Pensions Regulator and provide details of the scheme and the number of people enrolled.
There are phasing in dates so you may not have to act straight away, however, you should find out your staging date now and prepare. For full information please visit the Pensions Regulator website or call their helpline on 0845 600 1011. The Parish Resources site has useful advice on pensions. The Government has published advice on workplace pensions.
You will need policies and procedures covering areas such as fire, Display Screen Equipment (DSE) use, eye care, alcohol and drugs, lone working, working at heights and protective equipment. Resources are available on the gov.uk site.
You need employers’ liability insurance as soon as you become an employer. Government advice is available on employers' liability insurance.
The status of workers has been contested through a number of legal cases and many more are now recognised as having employment rights. There are different categories of worker and the rights and responsibilities differ for each.
- A worker: A worker may occasionally do work for the parish. The parish doesn’t have to offer them work and they don’t have to accept it. Their contract uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar. The Parish will be deducting tax and National Insurance contributions from their wages and will be providing the materials, tools or equipment that the worker needs to do the role.
- An employee: The majority of people provide personal service as an employee under a contract of employment. The individual is an integral part of the church and is paid through a Pay As You Earn (PAYE) scheme. The church has an obligation under the contract to offer work, and the employee has an obligation to accept the work offered, within the scope of the contract.
- Self-employed: Self-employed contractors normally provide one-off or specific services for a fee which is then invoiced to the parish. They will pay their own Income Tax and National Insurance contributions. They do not have employment rights such as statutory holidays, but they do have some legal protection such as an entitlement to a safe and healthy working environment.
- A limited company: An individual may set themselves up as a limited company for tax purposes, as opposed to being self-employed. This means that the parish pays the company for work completed as opposed to the individual and corporation tax is payable as opposed to personal tax. There are specific tax laws in relation to limited companies so if someone informs you that they are registered as a limited company, it would be advisable to check the situation with the HMRC.
Many PCCs use the services of those who are self-employed, as this is a reduced administration overhead. The risks are that this status may be challenged and that you find there are unexpected liabilities. This could be if:
- HMRC investigate. If the person is paying less tax and NI at present than they would as an employee then HMRC will expect the underpayment to be made up (both employee’s and employer’s contributions);
- An employment event happens leading to them claiming employment rights (e.g. if you cease to have a need for them, or if they become sick or pregnant). They may then have employment rights as for redundancy and/or unfair dismissal.
You will need to consider the likelihood and impact of these risks compared to the simplicity of them being self-employed. This needs to be based on facts around key terms and conditions on offer and the PCC’s working relationship with the individual, not just because someone says they are self-employed. The safest approach is to issue a contract of employment to them so they are an employee (although that may not be their preference and it involves more administration). If you decide not to then you will need to satisfy yourself of their self-employed status, both for tax and employment purposes.
Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:
- They’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit;
- They can decide what work they do and when, where or how to do it; • They can hire someone else to do the work;
- They’re responsible for fixing any unsatisfactory work in their own time;
- Their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish;
- They use their own money to buy business assets, cover running costs, and provide tools and equipment for their work;
- They can work for more than one client.
Someone is probably self-employed and doesn’t have the rights of an employee if they’re exempt from PAYE and most of the following are also true:
- They put in bids or give quotes to get work;
- They’re not under direct supervision when working;
- They submit invoices for the work they’ve done;
- They’re responsible for paying their own National Insurance and tax;
- They don’t get holiday or sick pay when they’re not working;
- They operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’ or an ‘independent contractor’.
The Law & Religion UK website has guidance on the position of organists and musicians (lease note that some of the links contained within this website may not work or have restricted access).
The status of the working relationship between the organist and parish can be determined using the employment status indicator. In most cases, as there is generally a high degree of mutuality and control, you will find that the organist is an employee of the PCC.In terms of the remuneration, there has been a tradition of describing payment to the organist as an honorarium. However a true honorarium is a ‘one-off’ payment after the event to say thank you to someone, it is not usually pre-determined. Therefore, paying a regular sum of money each week or month (even where it is topped up occasionally with separate payments for weddings, funerals etc) is likely to be regarded as a ‘salary’.
Recent employment tribunal case law (2008 onwards) suggests that tribunals are of the mind that most if not all organists are employees; even if the parties have explicitly agreed at the beginning of the working relationship that it is one of self-employment. Therefore, it is generally safest to establish an employment contract.”
Some other resources which might help are:
- A model contract is available here. The RSCM advice is here with more advice on employment status here.
- The Church of England's Legal Advisory Commission official Guidance is here.
The Safer Recruitment and People Management Toolkit provides useful template resources and examples to support you in implementing the Safer Recruitment and People Management Process (2021).
The Parish Resources site also has useful advice on volunteers.
If the intention is for the individual to undertake a role as part of their ministry experience that somebody would ordinarily be paid to do, e.g. youth worker, then the parish should employ the individual (on a part-time or full-time basis) on the National Minimum Wage rate for those of at least school leaving age. however, the diocese promotes the National Living Wage. If the role is purely a voluntary ministry experience, intended to provide the person with a learning opportunity to explore vocation (possibly as part of the discernment process for potential future ministry), then a voluntary worker status may be appropriate.
The status of the voluntary worker is recognised in section 44 of the National Minimum Wage Act 1998. It specifically relates to an individual who is working for a charity or a voluntary organisation, but who is not an employee. The special status of voluntary workers means they are not required to be paid the National Minimum Wage. However parishes must be careful to comply with the requirements of section 44, otherwise, the individual may be deemed to be a regular worker or even an employee and therefore entitled to the National Minimum Wage (and possibly other employment benefits e.g. annual leave, statutory sick pay etc.) in respect of the whole of their ministry experience. Voluntary worker status can apply to an individual working for a charity, providing that:
- They receive no monetary payments of any description, or benefits in kind, except in respect of expenses actually incurred in the performance of their role (or reasonably estimated as likely to be or to have been incurred;
- The voluntary worker is not being treated as an employee (e.g. there is no mutuality of obligation).
Using this status, you may decide to reimburse expenses actually incurred in the course of the ministry experience, for example, travel costs, or make a payment in respect of expenses reasonably estimated as likely to be incurred. An estimate may be arrived at by reviewing actual expenses incurred over a number of weeks or months and arriving at an average. You may also decide to offer parish accommodation as a benefit in kind e.g. a benefit that may need to be taxed.
In some circumstances, if accommodation is necessary to fulfil the role, then it may not be deemed to be a taxable benefit. Typically, a parish or scheme may offer a room in shared accommodation. Accommodation allowances (i.e. payments to meet the cost of accommodation) can only be paid in extremely limited circumstances, which will not normally apply to ministry experience schemes. You should seek specific tax and legal guidance if you wish to explore this further.
If the volunteer worker is offered accommodation with a friend, family member, or similar, that is not specifically connected to their ministry experience, this would be deemed to be a private arrangement. Accommodation providers may wish to take into consideration the government ‘Rent a Room Scheme’, which from 6 April 2016 allows an individual to earn up to a threshold of £7,500 per year as of tax-free from letting out furnished accommodation in his/her home. Please read the current guidance found here.
You will need to consider the taxable status of any subsistence payments you may make. In particular, where these might be considered ‘payment’ in return for work and therefore indicative of an employment relationship, and thus taxable.
Furthermore, any such payment of subsistence could be deemed to be an avoidance of employer obligations (e.g. Employer NI, income tax). It is therefore recommended that if you wish to make any sort of additional payment to avoid the volunteer worker being ‘out of pocket’, that these should be treated as receipted expenses (or a payment in respect of expenses reasonably estimated as likely to be incurred).
A volunteer worker may require some training during the course of their ministry experience (e.g. safeguarding training). However, any training which goes beyond supporting their ministry experience will amount to a benefit in kind falling outside the scope of section 44 and so could render the ministry experience volunteer a normal worker or employee.
You should go through a clear process when taking on volunteers, including preparing a role description, advertising and formally assessing those coming forward by way of (at least) an interview. You must apply the normal checks e.g. references and DBS checks where appropriate (it can be easy for someone to move from a voluntary position to a paid one without the checks being done as they are “known”, so completing checks at the outset is essential).
When appointed you should ensure there is a volunteer agreement in place. Ensure that if volunteers receive training, that this is directly relevant to the voluntary role they are performing and not a benefit provided to them in exchange for their work. Do not place an obligation on the volunteer to perform the work, ensure that there is flexibility e.g. they can refuse to carry out the work so that there is no legal obligation to perform the duties.
The pay you offer as a PCC is for you to decide, of course, however, you must comply with the statutory National Living Wage (NLW) for those aged 23 or over and the National Minimum Wage (NMW) for those of at least school leaving age or an apprentice. Refer to the government website for current NLW and NMW rates.
The diocese promotes the ‘real living wage’ rates – at the moment this is £9.90 per hour from 15th November 2021 in the UK and £11.05 per hour in London. The NLW and NMW are the legally enforceable minimum level of pay whereas the real living wage is an informal benchmark, so differs from the national minimum wage rate. Employers should implement this rise as soon as possible and at the latest by 15th May 2022. You must ensure pay between similar employees is consistent. If you offer other benefits then you need to be clear about whether these are to form part of the employment contract or not. If they do, it will be hard to vary or remove them. There could also be potential tax implications if you offer generous benefits. The government website has useful advice on this.
Acas has a useful guide to employee records (although it pre-dates GDPR). The following tables set out required and recommended periods for the retention of records.
The table below summarises the main UK legislation regulating statutory retention periods. If parishes are in doubt, it's a good idea to keep records for at least 6 years, to cover the time limit for bringing any civil legal action.
For many types of HR records, there is no definitive retention period: it is up to the employer to decide how long to keep them.
Different organisations make widely differing decisions about the retention periods to adopt. An employer must consider what would be a necessary retention period for them, depending on the type of record. The advice in this factsheet is based on the time limits for the potential tribunal or civil claims, which is often a question of judgement rather than there being any definitive right and wrong.
Where the recommended retention period is 6 years, this is based on the 6-year time limit within which legal proceedings must be commenced under the Limitation Act 1980. So, where documents may be relevant to a contractual claim, it’s recommended that these are kept for at least the corresponding 6-year limitation period.
Our new parish administrator says they would like to be self-employed, is that ok?
Just because someone says they are self-employed; it doesn’t mean that they are. Employment status is based on the key indicators shown. Each situation must be based on its own merits and an assessment should be carried out for each person. You can use the Employment Status Indicator Checklist.
Our office manager runs their own business at weekends. Can they be self-employed in our parish too?
It would be possible for someone to be employed by the parish during the day but running their own separate business on the weekends. You should look at their parish role separately as they could well be in an employment situation.
The appointment of organists and Directors of Music is covered by Canon Law (Canon B20), contract law and as appropriate, employment law. The status of the working relationship between the organist and parish can be determined using the employment status indicator. In most cases, as there is generally a high degree of mutuality and control, you will find that the organist is an employee of the PCC.
In terms of the remuneration, there has been a tradition of describing payment to the organist as an honorarium. However, a true honorarium is a ‘one-off’ payment after the event to say thank you to someone, it is not usually pre-determined. Therefore, paying a regular sum of money each week or month (even where it is topped up occasionally with separate payments for weddings, funerals etc) is likely to be regarded as a ‘salary’.
An employment tribunal case law (2008) suggests that tribunals take the view that most if not all organists are employees; even if the parties have explicitly agreed at the beginning of the working relationship that it is one of self-employment. Therefore, it is generally safest to establish an employment contract. The Law & Religion UK website has very useful guidance on the position of organists and musicians. A model contract is available here. The RSCM advice is here with more advice on employment status here. It includes tax advice.
We run a bar and have a group of casual workers who work occasional shifts as and when required. They are self-employed and paid in cash, is that ok?
You need to establish the facts. It is likely that they would not be self-employed owing to the obligation required when they are working but at the same time, the parish may not want to give them a regular contract. It may, therefore, be appropriate to provide them with a casual worker/zero hours contract on the PAYE system. Cash in hand is unlawful if no proper taxation records are kept.
The Employment Status Indicator (ESI) is an HMRC online interactive tool that asks you a series of questions about the working relationship between you and your worker.
HMRC will accept the tool’s outcome as binding, as long as your answers accurately reflect the terms and conditions under which your worker provides their services. You must also retain a printout of the ESI result screen and the Enquiry Details screen showing your replies to the questions asked. We suggest you use this tool as part of your general picture building, not as a sole tool on its own.