Why the label matters
TAJ's Employer's Guide sorts paid work into three kinds of contract, and each one puts the tax in different hands.
| Contract | What it is | Who handles the tax |
|---|---|---|
| Contract of service | Employment. The person works for you. | You deduct income tax, NIS, NHT and Education Tax from their pay, and pay your own matching NIS, NHT and Education Tax, plus HEART. |
| Contract for services | An independent business doing a job for you. | The contractor files and pays their own taxes and contributions under self-assessment. |
| Personal services | Professional, clerical, technical, administrative or managerial work done under your supervision or control. | A special case: treated as employment for income tax withholding only. See below. |
Get it wrong in the employee direction and two things go missing at once: the deductions that should have come out of each pay, and the business's own share. The employer is the one TAJ holds responsible for both. The rates are in NIS, NHT, Education Tax & HEART.
TAJ's test, question by question
These are the signs TAJ's guide lists for each side. No single answer settles it. Look at the whole pattern for each person.
| Ask | Points to an employee | Points to a contractor |
|---|---|---|
| Who controls the work? | You supervise, direct and control how it is done, and expect regular reports | Nobody controls how they do it |
| Is the role part of your business? | It is an integral position in the organisation | It is not integral to how you operate |
| Do they run their own business? | No | Yes, they trade on their own account |
| Can they work for others at the same time? | They work for you under an exclusive arrangement | They can serve several clients, each under a separate contract |
| Whose tools, materials and workplace? | Yours | Their own equipment |
| How are they paid? | A regular salary or wage, with their expenses reimbursed | A fixed amount or commission for the complete job |
| Do they get leave and staff benefits? | Yes, vacation leave and other staff benefits | No |
| Who carries the financial risk? | You do | They do, and they manage their own investment |
When most of the answers land in the employee column, treat the person as an employee.
Four things that don't make someone a contractor
- "They're only casual." TAJ's guide applies PAYE to casual labourers in the same way as to regular employees, and lists casual and temporary workers among the people PAYE covers. Casual describes how often someone works, not who they work for.
- "They pay their own NIS and NHT." In TAJ's guide, paying your own taxes is what follows from a genuine contract for services, not a test for one. And a worker's own payments never cover the employer's share, which only the business can pay.
- "We signed a contractor agreement." TAJ's questions are about how the work is actually done. If the day-to-day looks like employment, a document that calls it something else doesn't change the answer. A written agreement protects you when it matches the facts.
- "We pay cash every week." Regular weekly or monthly pay is one of TAJ's signs of employment. Paying in cash, or without a payslip, changes nothing about the relationship.
Some examples
- An office assistant who works set hours at your premises, on your computer, and is paid every week: an employee on every sign.
- A weekend helper called in only when you're busy and paid by the day: still an employee. Casual work is employment.
- A plumber who quotes a price per job, brings their own tools, carries their own risk and has many customers: a contractor.
- A freelance designer who sets their own hours, uses their own equipment and invoices several businesses: a contractor. If the same designer works set hours at your desk under your direction, the answer moves toward employee, and the personal-services rule below can apply.
These are illustrations. Each person's status turns on their own facts.
The special case: personal services
TAJ's guide counts professional, clerical, technical, administrative and managerial work as personal services. When someone provides them, personally or through their own company, and you supervise, direct or control how they do the work, the Income Tax Act treats them as your employee for one purpose only: you withhold income tax from what you pay them. This is section 5(1)(c)(ix), in effect since 2002.
Education Tax still applies to that income, but you don't withhold it. The person declares and pays it on their own S04A and S04, and you make no matching payment.
If you've been treating employees as contractors
Decide each person's status
Go through the questions above one person at a time, and write the answer down.
Start deducting from the next pay run
If the business has never filed an S01, ask TAJ what it needs to get started. Then deduct, pay the employer's share, and file the S01 by the 14th of the following month. The sooner the first correct run, the less builds up. How to file your S01.
Deal with the past separately
Penalties and interest on earlier periods are TAJ's to work out. Speak to TAJ or your accountant before you estimate anything. What late filing can mean.
Make the paperwork match the facts
Job descriptions, letters and agreements should describe the work as it is actually done.
How Brawta handles it
Every person in Brawta has a Statutory Basis: Employee, the default, or Contractor.
- Employee: Brawta works out PAYE, NIS, NHT and Education Tax on every pay run, adds the employer's share including HEART, and totals your S01.
- Contractor: paid gross, with no deductions. Brawta won't save someone as a contractor until you note the written agreement behind it, so the reason is on file if TAJ asks. It can't judge the agreement; it makes sure there is one.
- Job letters say "employed by" or "engaged on a contract basis" to match the person's record.
Source: Tax Administration Jamaica, Employer's Guide (December 2019), pages 5 and 11 to 13. General information, not tax or legal advice. Confirm your own situation with TAJ.
Get each person's status right from the first run.
Brawta keeps employees and contractors apart, applies every deduction and the employer's share for the employees, and keeps the record behind each contractor. Private on your own machine. Free to try.