If you are a Tutor Agency (you introduce tutors to clients/parents looking for tutors) then watch out! Big changes are coming following a recent Court case.
What happens now?
A Tutor Agency finds clients/parents looking for tutors. The Tutor Agency introduces those clients to a tutor. The tutor provides the tutoring service. The Tutor Agency bills the client for the
- Tutor’s own fee AND
- Agency fee or commission (payment for finding the clients etc)
The client pays the Tutor Agency (who keeps their own fee) and then pays the tutor.
What do I need to do?
If you are a Tutor Agency you need to immediately review the way you run your business. For many it will mean making changes. That, in turn, means changes to how tutors work and get paid.
Why do I need to do this?
If you don’t review your business and make the changes you will experience some problems. The Employment Agency Standards Inspectorate have a legal right to investigate and/or inspect your business. The latest case shows tutor agencies to be ‘of interest’ ie likely to be subject to investigation. If you are not complying with your obligations you can be:
- stopped from running your business
- forced to pay an unlimited fine
When do I need to make the changes?
Now! However, there is a ‘grace’ period for members of the Tutor Association. As a member you have until the 31 December 2022 to make the necessary changes.
What type of Tutor Agency do the changes affect?
Every type! The Employment Agency Standards (EAS) says you are a tutoring service if you introduce tutors to clients. This will be irrespective of things like:
- whether or not the Tutor Agency organises a Tutor’s diary
- whether the Tutor Agency is intending to make a profit
- how it’s run (online etc)
What do Tutor Agencies have to do?
(1) Decide what type of business you are.
There are 2 basic choices
Employment Business – Direct responsibility for providing tutoring
- The client buys/contracts with you. You need a written agreement with the client.
- You then work with a ‘tutor’ who is a separate business (self-employed or Ltd company). You need a separate written agreement with the tutor.
- You are legally obliged to provide the tutoring service and the ‘buck’ stops with you. You deal with complaints and issues. You can make checks and changes. You can end the relationship between client and tutor (subject to your agreement with tutor).
- Payment –
- You bill the client from your business (include VAT). You don’t have to tell the client how much you pay the tutor.
- The client pays you
- The ‘tutor’ bills you and you pay them directly
- You are responsible and must pay the tutor, even if client doesn’t pay the tutor
Employment Agency – Introducer
- You introduce the tutor and client. Again you need written agreements. These are different agreements to the ones you have as an Employment Business.
- The tutor must be self-employed or a separate company. The tutor can use an Umbrella company who employs the tutor and provides you with the tutor’s services.
- You don’t ‘supervise, direct or control’ tutors. No checking up or making changes. You are not involved in disputes.
- You bill the client your fee/commission
- The tutor sets their own fees (you can guide them, but you can’t tell them what to charge). The Tutor bills the client for their work (charging VAT if they are registered). In most circumstance you will/can do the admin BUT the client must pay into the tutor’s own account.
- You are not responsible for paying the tutor if the client doesn’t pay
(2) Follow the rules for your business
Each type of business has different rules and you must follow them.
This includes tax rules (referred to as off-payroll working) or IR35. If you don’t follow those ‘rules’ HMRC may decide that a tutor is your employee. You will be responsible for backdated PAYE.
You’ve also got to comply with other legislation which may include
- Changes to the information you collect and keep from and about tutors. This includes DBS information
- Things you need to do if, for example, you think that an Applicant is or has become unsuitable for a service
- Changes to the records you keep and how you keep them. This include reviewing your Data Protection record keeping because of the personal information you’ll hold about tutors.
Following these rules means you need to
- Say what you do (in written agreements and policies)
- Do what you say
- Be able to prove it!
I’m a tutor – how does this affect me?
As the Tutor Agency makes changes they will impact on you. For example, there may be changes to the way in which you’ve been paid. Tutor Agencies who operate as Employment Agencies may ask you to accept payment in a different way. For example, they may ask you sign up to a something like Stripe Connect.
You’ll need to prove your ‘independent’ status as a self-employed freelancer or limited company. You may need to explore whether being ‘employed’ through an umbrella company works best for you.
As you’re running a business (self-employed or via a limited company) you have obligations and responsibilities. You must comply with these.
Let’s talk it over
If you’re a Tutor Agency or a Tutor business and you’d like to talk about how this impacts on you we can help via our Business Consultancy Clarity Call.
Perhaps you are a Tutor Agency who isn’t sure which business model will work for you? We can help you explore options and suggest small changes that will make a huge difference to you and your business.
If you’re a tutor we can talk to you about the changes and ‘tweaks’ which you can easily make.
Let’s work together for business clarity.
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