How does the law define being self-employed?
A self-employed person will run their own business and take responsibility for the success of the business. Self-employed people are more likely to be contracted to provide a service for a client and will not be paid through PAYE.
Ultimately only a court or employment tribunal can make a final decision on someone’s employment status. Someone can still be classed as an ’employee’ or ‘worker’ even when they are taxed on a self-employed basis. The court or tribunal will look at the employment relationship between the person and business.
Why is it important to determine employment status?
Because a self-employed person will not have the same employment rights and responsibilities as employees or workers. Employees and workers’ rights include the national minimum wage, maternity and paternity pay, itemised pay slips and paid annual leave. Self-employed workers rights are governed by the terms and contract that they enter with the party who engages them.
What has this got to do with the gig economy and zero hours contracts?
The debate over employment status heated up following the Taylor Review of Modern Working Practices published by the government last year, which turned the spotlight on working flexibility and offering employment security.
The ‘gig economy’ is defined as a labour market of short-term contracts and freelance work as opposed to permanent roles. There are more than five million self-employed people in Britain according to government figures and those in the so-called gig economy are typically paid for each job performed, not by the hour.
Why have Hermes and Uber made headlines then?
Hermes recently lost an employment tribunal case relating to several of its couriers which they classified as self-employed but were deemed as regular employees and therefore entitled to benefits such as holiday pay. Taxi ride company Uber also lost an employment tribunal case which ordered it to treat its drivers as workers giving them similar access to employee benefits such as holiday and sickness pay.
What should I do as an employer?
The Hermes and Uber cases are just some of a number of similar claims in which individuals who appear to be self-employed have succeeded in their claims that they are, in fact, employees or workers. The reason that Hermes and other companies who engage self-employed contractors (Pimlico Plumbers, City Sprint, Addison Lee etc.) are fighting these status cases is because where the case is proved it can be extremely expensive, for both future payments and in respect of past omissions, including for non-payment of holiday pay.
With this in mind employers should ensure their contractual documentation reflects the realities of the relationship between the parties, update their records accordingly and rectify any anomalies to stave off future possible claims. Bowcock & Pursaill employment solicitors can audit your current practices and policies and offer our Employer Protection Scheme to help you avoid costly claims and provide legal solutions should you face an employment dispute.