There has always been questions over employee status particularly around the self-employed and their rights. However, in the last few years there have been some very high profile cases at the Employment Tribunals courts considering the question over employee status. In all of the cases including Uber, Deliveroo, Pimlico Plumbers, the judges have sided with the claimants and have found they are workers in the eyes of the law and although Pimlico Plumbers have been given permission to appeal at the Supreme Court, getting a person employee status wrong could prove costly to a company.
So as a company, what to you need to consider so you don’t blur the lines over employee status when engaging people to undertake work on your behalf.
The first point is you cannot rely on a person’s tax code to decide their employee status. HM Revenue and Customs (HMRC) may regard someone as self-employed for tax purposes even if they have a different status in employment law. When checking if a worker is self-employed, an employer should look if their self-employed in employment law (if they have employee rights) and tax law (if they shouldn’t be paid through PAYE).
The second point is companies need to be aware of the definitions around the most common employee status, which include:
An employee is somebody that is issued with a contract of employment, is under direct control of the company and has a larger number of employment rights and responsibilities than a worker (although all employees are ‘workers’). Some of the additional rights include the ability to claim unfair dismissal, statutory redundancy payment.
A worker personally performs work or a service for a company under a contract, although it doesn’t necessarily have to be a contract of employment. They are entitled to some rights including protection under the working time regulations, the right to national minimum wage.
A self-employed worker is an individual who runs a business themselves and they can decide what work they do and when, where or how to do it. They can delegate the work to others to complete on behalf of them. A self-employed person will usually have a contract for services with the client that sets out the schedule of works and payment terms.
The third point is to the consider the questions the employment tribunal will ask. Although employee status is not necessarily clearly defined in employment law through case law over the years it has provided the employment tribunal with a template of questions to consider with the two main ones being:
The more control you exert over a person in terms of the work the more likely they are going to be classed as a worker/employee i.e. do you dictate what work they do, when they work, how they do the work, and whether they can send somebody else in their place
Employment tribunals will look at whether there is a mutual obligation between the company and the person including whether there is an obligation on behalf of the company to provide work and for the person to accept work and whether there has been a commitment to sick pay and honoring holidays.
Some of the other questions consider by an employment tribunal include:
If you have any queries regarding employee status, please contact a member of the HPC team on 0844 800 5932 or email: email@example.com.
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