Although cash in hand can seem like a neat, efficient way to pay your domestic cleaner, this method can have its downsides as well. It’s important to make sure you understand everything about paying cash in hand, including the negatives, the technical details and your responsibilities as an employer, before you decide if it is the right method of payment for you.
What is cash in hand?
Cash in hand is when you pay your domestic cleaner (or any person working under your employ) in cash instead of by another method, such as cheque or direct debit. For example, if your cleaner comes in once a week you may prefer to put the cash directly into their hands at the end of each week.
Why do people pay cash in hand?
On the surface, paying your employee cash in hand can seem like the easiest solution. You simply put their money into an envelope each week and pass it on to them. In reality, there is a lot more to it.
Is cash in hand illegal?
It isn’t illegal to pay your cleaner cash in hand. However, the cleaner must tell HMRC that they are earning money and pay any taxes liable. You will also need to declare that you are an employer and update yourself on the rules that come with that status.
Cost to the economy
One of the biggest arguments against paying your domestic cleaner cash in hand is that it can cost the economy money. It is estimated by some that more than £2 billion a year is lost because people being paid cash in hand do not declare their income and therefore do not pay the relevant tax to the taxman. Because it is up to the person being paid to declare any money they make, it is easy for them to avoid paying taxes by not telling the government how much they are earning. By paying your domestic cleaner cash in hand, you are potentially facilitating the loss of billions of pounds from our economy. Paying into your cleaner’s bank account means there is a solid record of transactions between the two of you that can be tracked by the government.
How are the government trying to solve this problem?
The government has increased public awareness of tax evasion and is targeting those job areas most likely to be culprits, such as those in trades being paid by cash in hand. Penalties for evading taxes are very harsh.
What are the negatives for your domestic cleaner?
Although paying your cleaner cash in hand might feel like you are making things easier for them, there are several downsides for the cleaner in this situation. Your cleaner may lose certain rights as an employee that someone who is paid in a method other than cash in hand keeps. For example, the rights to maternity leave and sick pay. Sorting out their own taxes also complicates things.
Risk to you as the employer
If you are paying your domestic cleaner cash in hand, you need to make sure you inform HMRC that you are an employer. You must also deduct the right amount of tax from your employee’s pay if necessary and give it to HMRC. It is your responsibility to make sure you pay your domestic cleaner at least the minimum wage and do not deny them any of their rights as your employee. If you are caught violating the rules in any way, the penalties can be harsh.
The British Institute of Cleaning Science says…
“There are a number of concerns that arise with ‘cash in hand payments’ affecting both the cleaning operative and the employer. These include:
Concerns regarding liability (should the cleaning operative have an accident whilst cleaning on an organisations premises).
Damage to property and materials (this can occur with untrained staff).
Damage to the operative (this can also occur with untrained staff).
Potential health issues through incorrect use of cleaning agents.”
– Maureen Kelso – Head of Education and Qualifications, BICSc
Tips for paying your domestic cleaner cash in hand
- Keep careful track of when and how much you pay your domestic cleaner so that you have a permanent record of any transactions between the two of you.
- Make sure you are fully aware of the laws surrounding cash in hand payment of employees and are registered with the HMRC as an employer.
- Understand what taxes you owe HMRC and arrange for their payment.
- Report your domestic cleaner if you have any solid reason to believe that they are evading taxes or not declaring their income.
- Use payslips to keep track of how much you are paying your domestic cleaner, citing any tax that has been deducted.
If you want to free yourself from the obligations of being an employer by engaging domestic cleaners through a professional cleaning service contact us for a free quote today.