Engaging workers on a self-employed/self employment basis has historically been a plausible way of avoiding employment law obligations.
Self-employed people have very few rights; national minimum wage, for example, does not apply to them. The Government has recently highlighted the practices of some companies, including Deliveroo and Hermes, which appear to be blurring lines on self-employment and have urged that they stick to strict rules on paying their staff the legal minimum.
What does it mean to be self-employed?
Generally, there are three employment categories of employment status: employee, worker and self-employed. Different employment rights apply to each category.
Employees have the most employment rights because their working relationship means they are under the control of their employer and have little say in their contractual rights. Workers theoretically have more control and therefore fewer rights, and true self-employed people have no employment rights save for protection from discrimination in certain circumstances.
There is no requirement to pay national minimum wage, sick pay, or give paid annual leave etc. This is clearly attractive to some companies who are keen to protect themselves from the complexities that the law can bring.
So why doesn’t every employer only use self-employment?
True self-employed people are not under the control of the employer. The very nature of the relationship means that the self-employed person sets their own working hours, can do work for other people at the same time and can send someone else in their place to do the work etc.
Employers therefore, are not in a position to lay down the law with the self-employed. This potential for irregularity will not suit some companies who require the ability to control the who, when and where of work being carried out.
The reluctance to be bound by employment law coupled with the desire to be able to control the people working for them, means that employers will sometimes blur the lines between the categories of employment status. The courier firms involved in the recent press interest insist that their people are self-employed and therefore they are not legally required to ensure that they receive the minimum pay rates set by the law.
However, if an analysis of the everyday working relationship between the employer and the delivery personnel indicates that they are not self-employed, then they will be entitled to national minimum wage for future shifts and will also be able to make a claim for back pay.
Key self-employment considerations
- A contract which labels someone as self-employed will not stand up in employment tribunal if the everyday relationship contradicts self-employment e.g. the employer exerts control over the person;
- “They pay their own tax and national insurance so that means they are self-employed”. Employment law requires much more than this for someone to be self-employed. Tax and NI arrangements are not, on their own, enough.
- The ability to send someone to do the work in their place is a key element of being self-employed. However, any restrictions placed on the ability to substitute may mean that the person is not, in reality, self-employed in the eyes of a tribunal.
Each case has to be decided on its own merits with its own set of facts. Someone who is truly self-employed will often advertise themselves, quote for work and have their own business, even if they are a sole trader. There can be a great difference between John Smith undertaking some joinery work for you and JS Joinery who are undertaking the same work. The level of control and freedom is one consideration and there are many more. A tribunal will look at the power in the relationship and a self-employed person will retain more power.
John Smith who is told the hourly rate for joinery is £15 as opposed to JS Joinery who tenders for work and sets their own rates can make the difference to demonstrate that JS joinery retain a lot of power in the relationship to be self-employed.
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