Contractors in a pay run: withholding and the self-bill statement

A contractor on your books is paid through the same pay run as your employees, on the same calendar. What changes is how far Maliru goes. An employee's line stops at gross, for your payroll provider. A contractor's goes on: Maliru works out what is withheld under a scheme such as CIS and what they are paid, your business pays them from its own bank, and they receive a self-bill statement instead of an earnings statement.

Paying contractors is on the Crew plan and above; employee pay is on every plan.

This is about individuals. A subcontractor company that supplies people is not paid through a run at all; the last section explains the difference.

Who counts as a contractor

A run pays somebody as a contractor when their worker classification says so. Their work pattern sets it: everybody on a pattern whose Who this is for is Subcontractors is classed as a contractor. See work patterns.

On the run, the Paid as column shows Contractor or Employee. It is fixed when the run is worked out, and the statement says which rules it ran under, so a later change of classification doesn't rewrite a paid period.

What is withheld

Everything under Pay › Contractor withholding comes off a contractor's line, and nothing there reaches an employee. A contractor's line uses every component that is switched on.

The ready-made schemes:

• United Kingdom — the CIS deduction, 20% of the labour element.
• Ireland — the RCT deduction, 20% of the whole payment.

Anywhere else, set up your scheme with Add withholding. See setting up pay.

The component's rate applies to every contractor unless you set it differently for one person. Open the contractor under Users › Pay › Show pay, and under Contractor withholding press the pencil (Change for this person) beside the scheme deduction:

• Their own rate — for example 30% for a subcontractor whose status is unverified, or 0% for one with gross payment status. 0% still shows as a line on their statement.
• Does not apply to them — nothing is withheld for it at all.

Add a reason under Why if it helps — Verified 12 May, say. The change applies from the next pay run worked out; a closed run keeps what it paid. See setting withholding for one contractor.

The scheme deduction has to be checked before a run that pays a contractor can be worked out. A run with no contractor on it doesn't wait for it. If you have no contractors on your books, switch it off under Pay › Contractor withholding rather than checking a figure you don't use.

Materials a contractor bought are added to their pay as a pay item of the kind Materials. Under a labour-based scheme such as CIS they are handed over in full, because materials are not labour. See adding materials, a bonus or an allowance.

What they receive

When the run is closed and you Issue statements, a contractor gets a self-bill statement, filed in their documents as a Pay document, with the notification Your self-bill statement is ready. It is not called a payslip, because a payslip tells somebody they are employed.

The statement shows What we are paying you for, each line with how it was reached, and its Total, then Withheld and paid to the revenue, Charged back to you for any company deduction they agreed to, taken after withholding, and Paid to you. It says it was Prepared by your workspace in place of an invoice from you. Do not invoice separately for this work. See where to find your statement.

Paying them

Your business pays its contractors itself, from its own bank. On a closed run, More › Payment schedule lists the contractors to pay and how much, and More › Payment file for your bank gives the same payments with account numbers, for contractors whose bank details are on file. Employees aren't in either. See where wages go.

Work paid by the unit

Measured work, route stages and completed jobs a contractor is credited with are on the contractor ledger, where a line can be held or disputed before a run pays it. See paying by the job or by the route stage.

Their withholding on the return

What came off a contractor appears under Pay › Withholding return, in Contractors on the books, beside the subcontractor companies. It gets there only when the run is closed and marked as paid, and it lands on the return for the period the money went out. A closed run you haven't marked as paid is on no return yet. The return shows what was actually withheld, at the contractor's own rate where one is set, and under a scheme on the whole net amount, such as RCT, their whole pay counts as labour. See what you withheld.

Maliru works out the figures for the return. It does not file it.

Not the same as a subcontractor company

If a person works for you through a subcontractor company, set Supplied by on their record instead. They then get no pay run line: you owe the company, and their work is invoiced to it — by the company, or by you through Self-bill a supplier. Paying them on a run as well would pay the same labour twice. See self-billing a subcontractor.