RAFFCA Instructor Remuneration - Introduction
There has been a lot of confusion about the relative merits of RAFFCA Club instructors being paid under PAYE/being encouraged to set themselves up as a Limited Company/operating as a Sole Trader. Consequently, as it is of interest to a number of RAFFCA Clubs. The advice below has now been received from DDLS (RAF) staff (Thanks are due to AVM Irvine) and is forwarded for information and guidance as required.
Advice to RAFFCA is as follows
Whilst the limited company may initially seem an attractive option as a vehicle for flying instructors to avoid liability, it is not quite as straightforward as it seems. In normal circumstances the legal entity itself would be liable for the acts of the employee instructor under the principle of vicarious liability. Whilst this situation would be the norm, the principle has been eroded in several areas.
First, if the employee instructor does not act in the course of his employment then, the principle of vicarious liability may not apply and the instructor may become personally liable and sued directly by a claimant. Another important area where the directors of the company become exposed is if the company was accused of committing the criminal offence of gross negligence manslaughter. Whilst this may seem far fetched and not applicable to flying instructors, the case of R v Kite and Oll Ltd  shows how real this risk is. There is a particular risk where there are only one or two directors. This case resulted from the Lyme Bay canoeing tragedy in 1993 where 4 school children were killed. The directors of the company responsible for employing the instructors were subsequently prosecuted for gross negligence manslaughter. The company only had two directors of which Mr Kite was one. As there were only two directors, it was easy to prove that they had a controlling mind and knew that there was not an appropriate safety policy. The company was successfully prosecuted and Kite was imprisoned for two years and the company was fined £60,000. Together with the extra administrative tasks connected with a company, this all brings into question the advantage of setting up a limited liablity company in the first place.
As has been suggested one alternative would be for RAFFCA clubs to employ instructors as part-time employees. However, RAFFCA clubs would then need to comply with all the legislation applicable to employees. As has already been highlighted the club may need to register with HM Revenue and Customs depending upon whether the salary level is above the PAYE threshold and the National Insurance lower earnings limit. Whilst there are generally some exemptions/relaxation of the legislation where there are a small number of employees, part-time employees have the same statutory rights as full time employees and clubs would have to ensure that they comply with employment legislation at all times.
In my view, the simplest option would be for instructors to be self employed and clubs merely to contract for instructor's services. One point to note, however, is that clubs cannot get around the applicable legislation merely by classifying the relationship as a contract for services when it is actually a contract of employment in all but name. The courts have stated that you have to look at all the facts to determine what status a person has.
In view of the potential exposure to liability, flying instructors (whether they have a limited liability company or are self employed) should ensure that they have adequate insurance cover (either effected by the Flying Club or their own personal insurance). A normal public liability policy would not cover instructors adequately. However, a slight word of warning, instructors must ensure that they stay within the terms of their policy. For example, a failure to possess a valid medical certificate, may mean that in the event of a claim, insurers reject all cover.
HM Revenue & Customs - Self Employment
Link direct to the government HM Revenue & Customs website.HM Revenue & Customs
Civil Aviation Authority
The CAA is the UK's independent specialist aviation regulator. Its activities include economic regulation, airspace policy, safety regulation and consumer protection.UK Civil Aviation Authority
Aircraft Owners & Pilots Association
AOPA is the largest, most influential aviation association in the world.AOPA