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Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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Good morning. I own a small construction company and hire

Customer Question

Good morning.

I own a small construction company and hire tradesmen on a subcontract basis, within the scope of the CIS. Retention is held (3%) on all payments due to them (as it is withheld from my company by our employers) to account for any costs associated with poor workmanship or snagging works in the defects period of the scheme.

I hired a supervisor to manage the works on 2 sites since November 2012. The works undertaken on the first site had been acceptable with only minor issues highlighted. He has, however, been unable to manage the works properly on the second site which has led to a great deal of abortive costs being forced upon my company by our client (the main contractor).

As the supervisor had walked out a couple of weeks ago over a disagreement regarding another tradesman I have since managed the works personally and have seen the full extent of the costs associated with rectifying the works, so have written to the former supervisor to explain that we will be withholding his final weeks pay to cover some of the costs associated with his poor performance.

His retort had been to, apparently, seek legal advice to determine the following:-

He should not have been considered a subcontractor as he was, effectively, employed directly on an hourly paid structure for the period, not on price-work through a composite company. Thus he is entitled to holiday pay and all of his retention paid to him as he was not responsible for managing the works that he had been paid to do. My counter to this would be to remind him that he signed an induction to working for the company as a self-employed person on a subcontract basis, within the scope of the CIS. The withholding of retention had been clearly explained and had been agreed to by him at the point of engaging his services. He was not hourly paid but received a "day-rate" and target related "bonus" payments.

He received several other benefits through my company (such as contributions towards fuel when asked to work long distances or contributions towards accommodation when asked to work away) which now complicate the divide between whether he will be seen as an employee or subcontractor.

I have checked various sources of information, including the HMRC website, to determine the legality or view-point of this situation but find very conflicting answers.

Could you please confirm, to the best of your knowledge with the information provided;

Would he be considered an employee, despite signing a subcontract form agreeing to work self employed within the scope of the CIS?

Is he entitled to holiday pay?

Have we been acting legally by withholding retention (as stated within our induction)?

Have we acted legally by withholding his final weeks pay due to the defective work highlighted?

Many thanks in advance for any help that you can offer with this.

Kind regards.
Submitted: 4 years ago.
Category: Law
Expert:  Ash replied 4 years ago.

Alex Watts : Hello my name is Alex and I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return.
Alex Watts : How much is owing please?
JACUSTOMER-woxnyblu- :

Circa £880 to the subcontractor.

Alex Watts : And it was in writing he was a sub contractor and agreed to the retention clause?
JACUSTOMER-woxnyblu- :

Absolutely. That is correct.

Alex Watts : On what basis therefore is he claiming to be an employee?
JACUSTOMER-woxnyblu- :

He has, apparently, sought legal advice which has determined that; by the nature of his constant employment for our company over the period, he should be treat as an employee. On the contrary, during the period he also undertook private work for his own clients, but I'm sure that this will not feature within his account to his solicitor.

Alex Watts : Was he required to do set hours with you, or as long as the work got done he could come and go as he wished?
JACUSTOMER-woxnyblu- :

A mixture of the two really. We all have to work within the hours set by the main contractor as they themselves are in contract and have planning regulations to abide by. Therefore he had to work site hours, but if he worked late to achieve a target on one day, he would not be bound to remain on site the next day... If he achieved a 5 day target in 4, he would not be criticised for having the 5th day off (in theory).

Alex Watts : Ok I had initially this was a contact dispute but let me look up the rules.
JACUSTOMER-woxnyblu- :

Thank you. Would it help if I were to email across the induction form that the supervisor signed prior to him commencing work?

Alex Watts : ok, yes please, attatch it here
JACUSTOMER-woxnyblu- :

Hi Alex. I've tried to paste it into the dialogue section but have been unable to, (possibly due to it being in PDF). I could send it via email attachment if you have an address that can be used.

Alex Watts : You can but it will take u
Alex Watts : ip
Alex Watts : it will take up to 24 hours
Alex Watts : [email protected]
Alex Watts : Put for my attention Alex w, as there are two of us!
Alex Watts : That goes to admin who forward it on,
JACUSTOMER-woxnyblu- :

Hi Alex. Thank you for this. I have sent the email and attachment for your attention.

Alex Watts : Ok thanks