If you are starting a new business or scaling up your existing operations you will be keen to ensure that you are delivering what you envisaged. Part of this is ensuring that those you work with are carrying on work under the “employment status” initially imagined by both parties. Cementing one’s employment status is key to guaranteeing that both you and the working individual know your rights, responsibilities and obligations during the employment relationship.
What is Employment status?
Employment status is the term used to describe the legal position of individuals providing their services in the job market. In recent years, the distinction between an employee, worker and the self-employed has become increasingly blurred, with many cases highlighting individuals as workers, who were initially engaged as self-employed contractors. Think “Uber”.
So, why is employment status important?
Employment status is important for a number of reasons. Employees are entitled to a multitude of varying legal rights such as the right not to be unfairly dismissed, the right to maternity leave and the right to request flexible working. Workers are entitled to lesser rights but still several rights including the right to national minimum wage and the right to holiday pay. The self-employed are the least protected but still have a right not to discriminated against. Knowing one’s employment status can be difficult, but it is important to get it right to know your employment obligations.
Getting employment status wrong
Let’s say, you engage the work of a self-employed contractor. You enter into an agreement stating that they are self-employed and they invoice for their charges. You provide them with a uniform, they drive a van with your logo on it, cannot substitute their attendance, and you must agree to any holiday taken. Regardless of the agreement in place, on the facts of the case, this individual is not self-employed. They may be a worker, or even (worst case scenario) an employee.
As you had been operating under the impression that this was a contractor, you would not have paid any holiday pay or maintained a stringent health and safety policy towards this individual. You would unknowingly be breaching your duties and the so called contractor could have several claims against you.
How do you avoid this situation?
Unfortunately, it’s impossible to set down a clear set of defining criteria against which employment status can be definitively determined – but here are some top tips:
- 1. An individual who is paid per job, or has the right to set their own rates, is likely to be a contractor;
- 2. Contractors should have an unfettered right to employ a substitute;
- 3. An individual should only be not be restricted from working for others if he is an employee;
- 4. Unless the individual is an employee, be cautious about their integration into the business. Do they carry out work substantially similar to that performed by employees? Are they within the scope of disciplinary and grievance procedures? If the answer is yes to all of these, the individual might be a worker or employee.
In all circumstances, make sure you have a contract in place, setting out the relationship. Although this is not definitive of the employment relationship, it is a starting point to understanding your intentions.