Articles

What's the difference – Employed or self-employed?

Suzie
24 Feb
by Suzie Business Owner & Senior HRBP

Employees, workers or self-employed contractors – Employers, be aware of the difference.

This blog will be very useful for maintenance, facilities and all Trade companies.

If the business has any arrangements by which they invoice the company and you know that they are a “one-man band”

READ THIS CAREFULLY and review your position with them.

People carrying out work can be categorised by different employment types depending on the nature of their relationship with the provider of work.

Employees and self-employed contractors are two of the more clearly defined employment types. Workers on the other hand are an employment category that is not as well defined and as such, it is subject to ambiguity.
What is the definition of a worker?

Unfortunately, the definition of a worker is not as clear cut as in case of employees or self-employed contractors.
The following however are usual characteristics of workers:

  • Have a contract of some kind to do work or provide services personally in return of monetary reward or benefit in kind. The emphasis is on personally.
  • They have a limited right to send someone else to carry out the work or deliver the services.
  • The employer has the obligation to supply work for them as long as the contract lasts and they have to take the work.
  • They are not carrying out the work or providing services as part of their own limited company.

In contrast with self-employed contractors, workers have a number of employment rights such as:

Right to:

  • receive at least the national minimum wage
  • minimum statutory paid holiday
  • minimum statutory rest breaks
  • not to work more than 48 hours per week and to opt out of the Working Time Regulations if they wish to do so

They also have protection against unlawful discrimination, unlawful deduction from wages and protection from whistleblowing.

In the recent case of Smith Vs Pimlico Plumbers Limited, the Court of Appeal upheld the decision of the Employment Appeal Tribunal that Mr Smith was in fact a worker and not a self-employed contractor, although the written agreement between the employer and Mr Smith was described as “Agreement – Self-Employed Operative”. This is likely to be an important case on employment status in years to come.

Although it is not an easy task, it is important that employers review the working relationships with the workforce and ensure that the relevant employment rights are observed, depending on their employment status.

 

How do you fix this?

Make sure all those you pay from invoice on a monthly basis can do the following:

  1. that you have a clear written services contract with them and hoepfully a limited company to be invoiced from
  2. they don’t get paid if they are on holiday or off sick
  3. they can send someone else to do the work if they want/need to (see point 2)
  4. they have their own tools and transport
  5. they are “self-directed” ie they can carry out the work with minimal instruction or management from the company they are contracted to
  6. they are aware of IR35 rules

When we are speaking with clients the common thing that is said:

“oh, Fred has worked for me for years, we trust each other, I can’t see a problem”

Frankly, people fall out and if you don’t have clear boundaries and follow the legal rules of working together then someone is going to Court.  And that applies for normal employees too!

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