Recent court cases involving the likes of Uber, Deliveroo and Pimlico Plumbers mean that the topic of employment status is never far from the spotlight. This reflects the growing importance of new ways of working, such as in the so-called ‘gig economy’.
Keen to enlarge its revenue from income tax and national insurance contributions (NICs), the UK Government has also been adopting a tougher line on employment status, ‘cracking down’ on various arrangements perceived to facilitate what is often termed ‘false self-employment’.
Organisations need to determine at the outset, ideally in writing, whether an individual is an employee, a worker or self-employed.
The three main factors (sometimes referred to as the ‘irreducible minimum’) that are normally considered by a court or an employment tribunal when determining an individual's employment status are as follows:
Personal service: An employee/worker is required to provide their services personally. They cannot employ or engage staff to support themselves in doing so. In contrast, a self-employed person is not required to carry out the services personally and has an unfettered right to appoint substitutes or additional personnel.
Mutuality of obligations: In an employment relationship, the employer is under an obligation to provide the employee with regular work, and the employee (quite often a worker too) is under an obligation to do the work where provided. An organisation is not obliged to offer work to a self-employed person on a regular or frequent basis and that individual is not obliged to accept any work where offered.
Control: An employee/worker is under the employer's control in terms of what they do, how they do it and when they do it, although professional or skilled individuals may exercise discretion over their own work and still be classed as employees. A self-employed individual is deemed to have the freedom to determine when and how they work and is not under the direct control or supervision of their client.
If all three of the above elements are present, the individual is likely to be an employee (or sometimes a worker). Tribunals normally look at the full picture, at the terms of the contract between the business and the individual, and how the arrangements operate in practice.
Other key indicators may be used to help determine whether an individual is employed or not. These can be found in the ECA’s Guidance Document on employment status (for ECA members only). Visit www.eca.co.uk/business-industry-support/employee-relations for more.