An individual may be an employee, a worker, or self-employed. As a business-owner, it is important that you understand the difference between these categories, as it determines the rights of each individual; what your responsibilities are; and also has tax implications.
Employees have more rights than any other category of staff, which includes the right to bring a claim for unfair dismissal and redundancy pay.
Workers have fewer rights, although these include important ones such as the right to holiday pay and the national minimum wage.
Genuinely self-employed contractors have far less protection in the workplace and their rights will be governed by the contract that they enter into with you.
Understanding the above and correctly categorising and documenting arrangements with staff is essential in order to protect your business from legal disputes, and the consequences of getting it wrong can be very expensive! Incorrectly categorising/treating someone as ‘self-employed’, when they are in fact a ‘worker’, could lead to them bringing an Employment Tribunal claim against you, as we have seen with the likes of Uber and Pimlico Plumbers recently, and it may also affect the tax and national insurance contributions that you owe.
When taking on staff we recommend that you give serious thought and seek advice on status and the different types of arrangements because there are significant legal and practical differences. Simply labelling someone and agreeing with them that they are ‘self-employed’ does not make it so and if status is ever challenged a Tribunal or HMRC will look behind the label at how arrangements operate in practice. Also, if you suspect or encounter complaints relating to their status.
Our team will provide you with the correct advice to help you make the correct decision.
Our solicitors will help you to make a decision and keep you up to date of any developments.
We will ensure that you have a much better understanding of the different types of working arrangements and the significant legal, practical and financial differences so you can ensure that appropriate arrangements are put in place from the outset. We will also advise as needed with your current arrangements and your options for addressing risks/areas of concern. Appropriate and effective written contracts are also very important.
If a member of staff does complain about or disputes their status, or brings an employment status claim against you, we can assist in dealing with the complaint and defending any claim and, if necessary, brokering a settlement.
Our specialist employment lawyers can advise your business on the different types of employment status and the implications for your business; advise on status risk in relation to your current arrangements and your options for addressing this; review/prepare appropriate contracts; and help you deal with any status-related disputed and Employment Tribunal claims.
We are independently recognised as leaders in our field and will provide practical, commercial advice in relation to status which is a complex and challenging issue for businesses.
Our solicitors don’t believe great advice should equate to expensive fees. They will provide clear and upfront cost estimates with you to ensure that you remain in control of your costs at every stage.
We have acted for a trading company, settling their dispute with an overseas self-employed contractor and the local state tax authority in relation to employment status.
The advice was about the status risks of their current arrangements with staff and helped them address areas of concern and optimise their written contracts for the different types of arrangements they have.
Unfortunately, no. Labelling someone as ‘self-employed’ in their contract does not make them self-employed, even if they agree. If their status were ever disputed, an Employment Tribunal and HMRC would also look not just at the terms of the contract but also the reality of the working relationship.
It’s worth taking legal advice to ensure that you understand the status of each member of staff from the outset and that this is accurately documented, because inconsistencies and issues with the contractual documentation will already put you on the back foot.
Over time, an individual’s role may change in a way that affects their employment status. If you initially engaged someone on a self-employed basis, but their role has changed, you should review their status, and if it has changed, take action to update contractual documentation and agree this with the staff member.
It is also quite common when employment ends for a relationship to continue on a consultancy basis. If this is the case, it is important to check that their role and working arrangements really have changed and accurately document this.
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