# Becoming a Sole Trader, what do I lose out on or gain by this?



## hogg (22 Jan 2009)

Hi all
I hope I have this in the correct forum!

I work in a small agency, I am the only person apart from the owner who is employed by the company as I helped get the company started 3 years ago.
The other 2 members of staff are registered as sole traders, they have been working here for 2 years and invoice my boss every month.
As business has become slow these past few months, my boss has informed me that the only way forward is for me to become a Sole trader. He has guaranteed that he will continue to give me paid holidays, sick leave & as much notice as possible if company is going under (I would be the last one out)

My query is this what am I losing out on by becoming a sole trader? 
(do I lose out on maternity benefits, dental etc?)

Do I gain anything from being a sole trader?

Also my boss says I don't need to register for VAT but I'm not so sure
as based on my payslips my income for 2009 will be 45k (gross) do I need to register for VAT?

Thanks in advance
H


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## Domo (22 Jan 2009)

*Re: employer forcing me to become Sole Trader, what do I loose out on or gain by this*

Under Revenue rules, if you carry on working at the same premises, doing the same work, and being paid a weekly/hourly rate, and get paid holiday pay and sick leave, I would assume that you are an employee, no matter what your boss says.

Can you clarify what eactly you do and what type of business it is?

Is your boss aware of the Revenue rules?  Your employer can't choose whether you are an employee or self employed!!!  It is based on fact.

However, if he forces you to become a sole trader there is not much you can do about this - you will not get into trouble for this, it is he who may be enquired into by the Revenue - not you.

As an employee, you have employment rights.  Is he making you redundant?  Is he paying you redundancy pay?

As a sole trader, this will impact on your right to benefits.  I have set out below the benefits you can claim as an employee and self-employed (as far as I am aware).

Class A Benefits - for Employees:
* Jobseeker's Benefit 
* Illness Benefit 
* Health and Safety Benefit 
* Invalidity Pension 
* State Pension (Transition) 
* Treatment Benefit 
* Occupational Injuries Benefits 
* Carer's Benefit 
* Widow's or Widower's (Contributory) Pension 
* Guardian's Payment (Contributory) 
* State Pension (Contributory) 
* Maternity Benefit 
* Adoptive Benefit 
* Bereavement Grant 

Class S Benefits  - for Self Employed
* Widow's or Widower's (Contributory) Pension 
* Guardian's Payment (Contributory) 
* State Pension (Contributory) 
* Maternity Benefit 
* Adoptive Benefit 
* Bereavement Grant 

As a sole trader, you will have to prepare accounts and tax return every year and pay income tax under self assessment.  There may be advantages in this due to the types of expenses that you may be able to claim.  However, it is likely that you will need professional advice to do the accounts (to start with at least).

Regarding VAT, generally, if you are providing a service, if your turnover is €37,500 (as at 1 May 2008) or over you will need to register and charge VAT.  What is your service?  What do you do?  Some services may be Zero Rated or Exempt.

Also, as a sole trader you will loose all your employment rights - sick pay, holiday pay, redundancy etc.


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## hogg (22 Jan 2009)

*Re: employer forcing me to become Sole Trader, what do I lose out on or gain by this?*

Hi 
Thanks for the info
The business is in the advertising /design area and I am a designer. My boss was saying he cant continue to pay me the same wage so either I become a sole trader I would invoice him every month the same amount that I currently earn or I take a pay cut! 

A sole trader would obviously not charge for holidays or sick days but my boss said I can still charge the same amount every month regardless of if I take holidays/sick days (its kind of a bonus for me - the other sole traders are not getting this and are unaware that I am)

My husband said basically Im being made redundant from the job as an employee but am being rehired as a sole trader (keeping the same wages) I know I wont be getting redundancy pay as im still keeping my job!
My boss also says if things get better in a year we can look at going back to employee status.

My biggest concern are the benefits, if this company goes under and I'm a sole trader am I not entitled to the same unemployment benifits? Also while a Sole trader do I get less in Maternity and pension benefits than I would as an employee?

Regarding VAT, Stupid question but which is my turnover my  Gross or Nett pay? my gross pay will be over €37,500

thanks for your help, 
I really have no idea about Tax, VAt and benefits even though I should!!
H


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## Domo (22 Jan 2009)

*Re: employer forcing me to become Sole Trader, what do I lose out on or gain by this?*

Regarding benefits - I really don't know any more than I posted - you will need to contact a Social Welfare office and ask them - they are the experts - or ask in a Citizens Advice Centre.  With regard to unemployment benefit - I think this is based on your Class A contributions in a previous year - but the Social Welfare office can advise you of this.

Your turnover is the Gross income, so you will be required to register for VAT.  If you have to register for VAT I would suggest you get professional advice, even if you are going to do your own VAT returns, to make sure you do it all correctly.

As a sole trader, you are saving your employer his Employer's PRSI costs (10.75% of your gross wages), so if you were earning €45,000, you are saving him €4,837 per annum by doing this.  That is why the Revenue have rules in place to classify an employee - otherwise EVERY employer would consider letting go all employees and hiring them back as sole traders in this economic downturn to save costs.  

Also, he will have no employer obligations to you, and you will not have any employee rights, which is not in your interest, e.g. if he has to let you go in the future as a self-employed person, you would not be able to claim any redundancy payments, or unfair dismissal etc.

I would point out that should the Revenue look into his hiring you as a self-employed individual, and re-classify you as an employee, there could be implications for you in this regard, although it would be unlikely that they would be looking to you for additional taxes and PRSI - they will probably loook to him to sort it out.

I'm not trying to put you off, just to let you know what is involved.  I would guess that this will happen a bit more than usually now.


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## aetius (23 Jan 2009)

*Re: employer forcing me to become Sole Trader, what do I lose out on or gain by this?*

It only saves him Employer's PRSI if you invoice him the same amount. 

If you quit, he doesn't have to pay you redundancy.

I would stick it out - if he can't afford you, he can't afford you - and you're cheating yourself out of your redundancy entitlement, if you leave.

Whats to stop him from saying he doesn't need you once you're self-employed ? (Answer:- Nothing! and you're left with Nothing)


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## runner (23 Jan 2009)

*Re: employer forcing me to become Sole Trader, what do I lose out on or gain by this?*

As things seem to tough for the company, maybe offer to take a pay cut and stay as an employee.


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## John Conlon (23 Jan 2009)

Your query raises a myriad of issues.
Firstly, Revenue could query if it is genuinely sole trade? 
You are maintaining sick pay, holidays etc. 
It is hard to be definitive but if it walks like a duck its probably not a chicken.
He is not doing this for your life quality.
You will lose on redundancy, company pension rights if any.
Your contract can be terminated.
You will have extra costs like accountancy.
As you are providing a service you are ovetr the VAT threshold 37,500.

If you fail to charge VAT and are caught you will be hit, not your ex-employer.
All in all


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## JoeB (24 Jan 2009)

Sounds worrying to me... the most important point is probably that if you quit you don't get redundancy payments, and it may be likely that the work won't be there in the future, your redundancy entitlements may be large enough.

If you must charge VAT and you invoice him your current wages, then you will have to pay the VAT from your own wages and you would likely have few expenses to offset against. This would amount to a pay cut.

The other benefits of holiday pay, sick pay, maternity benefits are all gone once sole trading...

I think you'd be mad to do it... maybe offer to take a pay cut as suggested.


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## S.L.F (24 Jan 2009)

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