Employed or Self Employment?
There have been lots of recent reported cases of people claiming to be employees despite the organisations they work for describing them as self-employed. High profile cases have included Pimlico Plumbers, Uber taxis and Deliveroo. Most of you won’t care whether the person who unblocks your sink, drops you off at a restaurant, or delivers your pizza is an employee or not. However, if you are an employer there are legal and tax implications which may tempt you to look at this self-employment model.
In legal terms employees are entitled to numerous things that the self-employed are not. These include holiday, statutory sick, notice and redundancy pay, as well as the possibility of bringing claims for unfair dismissal and other matters. A third category of “workers” (essentially people who supply their services to others but are not running their own business) also have some of these rights. It’s those rights, and the beneficial tax treatment of the self-employed, which can make self-employment attractive to the organisation and the individual.
However, as we’ve seen in some of these recent cases; the label applied by the people involved doesn’t determine how either HMRC or an Employment Tribunal will view the relationship. HMRC might decide it is really an employment relationship so more tax is payable and/or someone described as self-employed may claim they are/were really an employee (or worker) in order to bring a claim for holiday, sick, notice or redundancy pay, or perhaps unfair dismissal.
So how can an employer encourage an Employment Tribunal to accept that someone is self-employed? The starting point is the contract for services, which should include that the individual:
- Can provide a substitute;
- Must provide their own tools;
- Will pay their own tax and national insurance; and
- Will reimburse the business for any resulting compensation, costs and expenses if they are found to be an employee by HMRC or an Employment Tribunal.
If you want to reduce the risk of being Deliveroo‘d an employment tribunal claim you will need to ensure that the way your work in practices reflect the agreement with those with whom you work.
James advises clients on all aspects of employment law including settlement agreements and how to deal with redundancy, disciplinary, performance, grievance and TUPE issues. He has also successfully represented clients bringing/defending claims in the Employment Tribunal.
Further advice please contact James Austin on 01423 851 138 or