5 Steps for moving to a self employed business model

Here are your 5 steps.

1. Assess Your Current Business Model

• Review Employment Contracts: Identify which staff members are currently employees and understand the terms of their contracts.
  
  
• Consult Professionals: Engage with an accountant or legal advisor to evaluate the financial and legal implications of the transition.

• Start a redundancy process:

If you're removing employed roles (e.g., stylists on payroll) to move to a self-employed model (e.g., chair renters), you must legally end those employment contracts. This is typically done through redundancy, not resignation or informal agreements.
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🔍 Redundancy Process Overview

1. Justify the Business Case
   
   
   • You must have a genuine reason for redundancy (e.g., structural business change or financial necessity).
     
     
   • Keep documentation showing why you're changing models (e.g., cost savings, flexibility, client demand).
     
     
2. Consult With Employees
   
   
   • If fewer than 20 employees are affected, individual consultation is required.
     
     
   • If 20 or more are affected, collective consultation rules apply (including notifying the Redundancy Payments Service).
     
     
3. Follow Fair Selection Criteria (if applicable)
   
   
   • If not all employees are being made redundant, use fair, transparent criteria for selection (e.g., performance, attendance, qualifications).
     
     
4. Provide Proper Notice and Redundancy Pay
   
   
   • Follow statutory notice periods (or those in contracts).
     
     
   • Employees with 2+ years of service are entitled to statutory redundancy pay.
     
     
   • Give written confirmation of redundancy, reasons, notice, and payment details.
     
     
5. Avoid Coercion into Self-Employment
   
   
   • You cannot force someone to "go self-employed" as an alternative.
     
     

Offering chair rental post-redundancy is fine, but it must be entirely voluntary and separate from the redundancy process.
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🔒 Key Legal Risks if You Skip This Step:

• Unfair dismissal claims
  
  
• Breach of contract lawsuits
  
  
• HMRC investigations if employment is terminated improperly but control continues
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🧾 Example of Getting It Wrong:

A salon in London (name withheld due to legal reasons) was ordered to pay £27,000 to a former employee after:

• Failing to follow the proper redundancy process
  
  
• Pressuring staff to “just go self-employed or leave”
  
  
• Not offering statutory redundancy pay
  
  

The Employment Tribunal found the dismissal unfair, and the salon had to pay compensation and tribunal fees.
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2. Define the New Working Relationship

• Choose a Model: Decide between a fixed chair rental fee or a commission-based arrangement.
  
  
• Draft Clear Agreements: Create contracts that outline the terms of the self-employed relationship, ensuring they reflect true independence.
  
  

3. Ensure Compliance with HMRC Guidelines

• Autonomy: Self-employed individuals should have control over their working hours, pricing, services offered, and choice of products.
  
  
• Financial Independence: They must handle their own bookings, payments, taxes, and insurance.
  
  
• Use HMRC's CEST Tool: Utilize the Check Employment Status for Tax (CEST) tool to assess the employment status of your workers here
• Avoid Disguised Employment: ensure you don’t all into the disguised employment trap - more info here
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4. Separate Financial Transactions

• Independent Payments: Self-employed staff should process their own payments to clients.
  
  
• Avoid Mixing Funds: Do not combine their earnings with the salon's finances, as this can raise red flags with HMRC.
  
  

5. Educate Your Team

• Inform Staff: Ensure that all team members understand the changes and their responsibilities under the new structure.
  
  
• Provide Resources: Offer guidance on managing their own business affairs, including tax obligations and insurance.
  
  

How can Slick help?

We have an Employed to Self Employed Checklist here

As ever, if you need help with any of these steps in Slick, please contact Customer Support via Live Chat.
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Final Thoughts

Transitioning to a self-employed model can be beneficial but requires meticulous planning and adherence to regulations. Ensure that all agreements reflect genuine self-employment, maintain clear financial separation, and stay informed about HMRC guidelines to safeguard your salon's.
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More helpful content from us on our Instagram:

What is Disguised employment - https://www.instagram.com/p/DF8LEHrpr0A/
‍Keeping self employment separate - https://www.instagram.com/p/DGLny3OPVr_/
‍Who is at risk of disguised employment - https://www.instagram.com/p/DGa9oDRo3Hp/

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Please note this blog does not constitute legal advice. You should consult with your solicitor or lawyer before taking any action.

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