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Why you should identify the types of employees in your business

PUBLISHED: 13:47 12 March 2019 | UPDATED: 13:47 12 March 2019

Trula Brunsdon of Sherbornes

Trula Brunsdon of Sherbornes

Archant

Who should be treated as an employee, who would be deemed to be a worker and who is self-employed. Trula Brunsdon takes a look back at the cases so far

It’s often confusing for employers to identify the types of employees they’ve got on their payroll - but it’s vital to do so.

Historically most companies would typically have engaged people either as employees or as self-employed.

If they were an employee, they had deductions made at source through PAYE, received holiday pay and the national minimum wage and had the right to claim unfair dismissal.

• The self-employed were responsible for their own tax affairs and had none of the benefits an employee received.

• However, there is a third employment status which was often overlooked – the worker. Like an employee, a worker would have a contract to provide their services personally to the entity engaging them but may have worked more independently, similar to someone who was self-employed.

Why does it matter?

Getting employment status wrong can lead to a costly bill for employers. If it has been assumed that someone is self-employed when they are in fact a worker, that individual can claim back pay for holiday and the national minimum wage.

A case in 2017 held that someone in this situation who was in fact worker, and so had not been able to take holiday, was able to claim four weeks’ holiday pay per year of service going back to 1996!

Review of recent cases

The majority of recent cases concern people who have been labelled as self-employed claiming they were in fact workers.

One of the most well-known cases was brought by Uber drivers who claimed that despite the fact they were called self-employed, they were in fact workers. Towards the end of 2016 the Employment Tribunal agreed with the drivers. The case has now worked its way up to the Court of Appeal which has also held they were workers. This will not be the end of the matter as permission has already been given for this case to be appealed to the Supreme Court.

In the meantime, an individual working for Pimlico Plumbers had brought a similar claim. The Court of Appeal said he was a worker and the Supreme Court agreed. An Addison Lee courier driver has also been found to be a worker not a self-employed contract.

In 2018 the Employment Appeal Tribunal held that a security guard engaged through an agency was actually a worker, working for the end user. This had additional implications for the end user as agency workers are entitled to parity in terms and conditions with those staff employed directly by the end user.

How to decide

It is easy to dismiss each case when it is reported and think “that doesn’t apply to my business” but when looked at as a whole there is a clear trend for Tribunals finding that individuals who have been engaged as self-employed contractors are in fact workers.

However, it’s important to remember that each case will depend on its own facts. A range of factors will be taken into account.

• Does the individual have to provide personal service or can they send a substitute?

• If they can send a substitute, are there any restrictions on this right?

• What level of control does the engaging company have over the individual’s work?

• Is the individual genuinely running their own business?

If you have staff who are thought to be self-employed, the first step is to look at those arrangements and decide if they are genuinely self-employed, or if that is just a label and they are actually workers. If they are workers, you can then decide what steps to take to limit any liability.

To find out more, visit the Sherbornes Solicitors website.

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