Many gyms contract Personal Trainers as self-employed workers, but with the IR35 changes here, could a change in the status quo be on the horizon?

Gyms and local leisure operations often consider instructors in gyms and personal trainers as being self-employed, however, there has been increasing scrutiny over whether people working in the so-called ‘gig economy’ are considered to be employees or workers, with employees entitled to greater rights and protections under the law.

Changes coming mean that coaches may have different rights and benefits, like in the recent Uber case in London, or the work you can expect them to do will change dramatically.

So with the IR35 deadline long-gone now, placing accountability with employers, how has everyone prepared for the changes?

Please explain what IR35 is!

IR35 is a piece of legislation originally introduced to the UK in 1999. Its purpose is to differentiate between those workers who operate as genuine contractors and those who work as ‘disguised’ employees to avoid paying tax.

From 6th April 2021, responsibility for determining whether a contract or assignment falls inside the legislation shifted from the self-employed contractor to the employer – meaning the employer needs to decide if the worker is inside, or outside IR35

Does IR35 apply to my gym or leisure centre?

IR35 applies to everyone and you have a responsibility to check you are doing the right thing, however, the burden does now fall on employers to ensure they’re acting correctly. If a worker provides their services to a client through an intermediary (a limited company or personal service company) but due to the nature of what they do and how they are managed as part of the team, they would be classed as an employee if they were contracted directly with the client, then they may fall inside of IR35.. This is where you need to check the agreements you have in place with your self-employed PTs and coaches. It’s not acceptable just to say they are a contractor so it can’t affect you.

Who decides if IR35 is applicable?

In the majority of cases, it will be the gym or operator’s responsibility. All public sector authorities plus any medium and large-sized private sector clients will be responsible for determining whether or not the rules apply and a worker is “inside IR35” or “outside IR35”.

Where the private sector client is considered “small”, the worker / limited company contractor will remain responsible for deciding whether IR35 applies.

Are gyms inside or outside IR35?

Under current guidance, for an assignment by a limited company contractor to be considered ‘outside IR35’, a number of conditions need to be met.

➔ Independence/control { A coach has the ability to plan their own time and hours }

➔ A right of substitution { The coach can send someone else in their place to do the work }

➔ Non-exclusive { coaches can work for multiple employers” }

➔ No mutuality of obligation (Is your client obliged to offer you work, and are you obliged to accept it?)

➔ Financial risk (Regular, guaranteed weekly or monthly work specified in a contract looks more like an employee ‘contract of services’ rather than professional fees paid to a person who is self-employed. A requirement to maintain professional indemnity insurance is another indicator that you are self-employed rather than an employee.) More information is available for gyms, by using the government’s CEST tool. If you’re a PT or coach, you can find more information for contractors here.

So what does this all mean practically?

PTs who are inside IR35 will attract staff benefits such as:

➔ Statutory sick pay and holiday pay

➔ Eligibility for employment protection – eg unfair dismissal rights for employees

➔ Increased stability regarding pay and working hours

➔ Take-home pay is there to spend, no worries about tax and NI coming off afterwards

➔ Staff discounts on products and services

➔ Access to Employee Assistance Programmes

➔ Being enrolled into a workplace pension scheme

➔ They’ll need to have company IT equipment like all other staff

PTs who are outside IR35 will likely benefit from:

➔ More control over how much they can deduct as expenses

➔ After Tax, NI & expenses, the remaining money is theirs to keep

➔ Being in charge of their own schedules and can pick shifts that suit them

➔ Generally being paid higher rates than their permanent counterparts

➔ No limit on the amount of time-off or holiday they can take

➔ The ability to pick and choose who they work with, and on what terms

➔ Staying in control of their own brand and messaging

Advice from the experts

“The defining feature of self-employment is independence. This means that a PT who is truly self-employed, and otherwise known as a “contractor”, should be completely free to accept or reject work – there should be no minimum number of sessions provided per week.

They should also be contracted to provide the service and nothing more. Employees have to fulfil any reasonable requests their employers make, such as cleaning the changing rooms, but a self-employed PT would not be expected to perform these kinds of tasks.

Having a workforce made up of self-employed contractors is much cheaper than workers. Self-employed people are responsible for making all their own tax and national insurance arrangements, do not have to be paid the minimum wage, or sick or holiday pay. The reason we’re seeing so many cases in the courts is that employers want to use the self-employed model to keep costs low while retaining high levels of control over their workforce. For example, many facilities require self-employed PTs to use a holiday booking system, accept a minimum number of client inductions a week and wear uniforms.

Going forward, gyms need to make a choice: either accept that their PTs are workers and provide the appropriate benefits, or relinquish some control and make them truly self-employed. Parliament and the courts are now wise to the need for stronger protection of workers’ rights, so employers must avoid taking advantage of the goodwill of self-employed workers.”

Philip Landau, Founder, Landau Law

6th April Deadline has passed, what now?

If your PTs or trainers are deemed inside IR35, then there is a tight deadline for the calculation of the deemed payment and paying HMRC. The key dates are:

● the deemed payment is treated as if an actual payment had been made by the company on 5 April

● tax and NICs have to be paid to HMRC by 19 April

● Where a provisional payment of tax and National Insurance contributions has been made because it has not been possible to accurately calculate the deemed payment and deductions by 19 April, then any adjustments should be reported via an Earlier Year Update (EYU) submitted electronically to HMRC before the following 31 January. However, interest on overdue tax is chargeable from 19 April if tax and NICs are underpaid on the basis of provisional figures

This article does not cover IR35 in its entirety, and if gyms or operators are unsure whether self-employed staff fall within or outsider IR35 then we recommend you check the government website which provides comprehensive information.

No matter which direction you need to go in, moving forward it’s important to use a platform that helps you plan, manage and control your resources with accuracy and transparency across multiple teams, locations and services. Get in touch if we can help you through that.

Preparing Gyms For IR35 Deadline