We have seen a series of Tribunal cases of late that have challenged where the line between worker and contractor should be drawn. So, to try and help Employers know where that line is drawn we have tried to clarify the current situation says Chris Wilkinson from Expert HR Solutions. He cautions however that as several cases are still awaiting final rulings the situation is fluid and suggests professional advice should always be sought as the cost of getting it wrong are significant.
The recent tribunal and court decisions have each found that some ‘self-employed contractors’ may be ‘workers’ for employment law purposes, even if they retain their self-employed status for tax purposes. The Uber drivers’ case has been all over the news. The Tribunal held that the two drivers were workers, at least whenever they had Uber’s app switched on. Uber still maintains that the drivers were self-employed contractors. The Employment Appeal Tribunal agreed that the drivers were workers. Uber are taking the case to the Court of Appeal later this year. There have been several other cases with similar rulings including CitySprint, Excel and Addison Lee cases and the Pimlico Plumbers case, which is currently before the Supreme Court.
The distinction between worker and contractor is financially important says Chris. Unlike self-employed contractors ’Workers’ are entitled to basic rights including holiday pay and the national living or minimum wage. ‘Employee status’ brings with it further rights and protections. These include the right to claim for unfair dismissal and the protection of TUPE. Now that the barrier of employment tribunal fees has been removed, workers may seek to challenge the line between ‘worker’ and ‘employee’ status too.
All of the above is just the employment law situation. If we were to add tax law to the mix, the waters would get muddier still. The Taylor review of modern working practices favoured retention of the three-tiered employee, worker, self-employed contractor approach, though it found the word ‘worker’ confusing and it proposed that those with worker status should be reclassified as ‘dependent contractors’. The review went further, despite its scope, suggesting that the distinctions drawn in tax and employment law should be aligned.
So, what are the key considerations for business asks Chris. If you engage people to work for you, you should think carefully about their status before they do. Make sure the paperwork and the reality tell the same story. Saying that someone is one thing when they are clearly another is grit for the conflict mill. Does the contract clearly define the worker’s status; for example, are they employed, a worker or self-employed? Are the terms clear and user-friendly? Do they make objective sense? Is there clear guidance on how the worker will report for work, and account for the time spent working under the contract? Do the terms set out how tax and national insurance will be dealt with?
Overall, do you feel confident that the terms accurately reflect the true relationship with the worker? Importantly, do you know what this status means for each of you? If you don’t, then why not give us a call on 01202 611033, your initial consultation is FREE.