Employee or not employee? That is the question

The days when working relationships were that of ‘master and servant’ have all but disappeared, and we are now left with a rich tapestry made up of the self-employed, employees, agency workers, and gig workers, to name a few.

You only have to glance at the news over the last few months to realise that businesses find themselves in an ever-evolving minefield of working arrangements.

The most high-profile question being asked of tribunals at the moment is – “employed or self-employed?”

Employers frequently try to set up working relationships, so that their workers are classified as self-employed, rather than as employees. This is because employees are afforded significantly more rights and entitlements than self-employed individuals, plus no national insurance will have to be paid by the business. Unfortunately for these ‘wily’ employers, employment tribunals do not fall for this farce, and instead look far beyond the superficial set up of the working relationship. Tribunals will analyse the intricate realities of the arrangement to identify the nature of it, and will take little notice of what is written on a piece of paper.

This was a tough lesson learned by both Uber and Pimlico Plumbers in the last few months. Both of these employers engaged workers on the basis of being self-employed, but, in reality, the workers were treated like employees on a day-to-day basis. The only difference was that the workers didn’t have the benefit of the additional rights and entitlements of being an employee.

This has been the trend for some time now and it seems that when the matter is raised at tribunal, the outcome is often that the ‘self-employed contractor’ is, in fact, an employee. Naturally, this begs the question: how can businesses ensure that the self-employed are actually self-employed?

Well, in the light of Uber/Pimlico-gate, ACAS has taken it upon itself to renew its ‘employment status’ guidance to include a greater focus on self-employment. It provides key factors which must be present if someone is actually self-employed, namely:

‘A person may be classed as self-employed if they:

• bid or provide quotes to secure work;
• decide when and how to do work;
• are responsible for their own tax and National Insurance; and
• do not receive holiday or sick pay when they are unavailable for work.’

This guidance may be updated, but it does not include any epiphanies. This is nothing that we did not know before. It still seems that, whilst there are some ‘practices’ that can be put in place, there is no definitive black and white explanation when it comes to employment or self-employment status. As has always been the situation, each case will turn on its facts, and in the absence of any definitive guidance and/or legislation, businesses will just have to follow the guidance of ACAS and case law for the time being. They would, however, be well advised not to class workers as ‘self-employed’ simply to avoid employment liabilities. Tribunals will not be fooled by this.

Jenny Hawrot works in our employment law team, advising clients on the full range of employment-related matters including TUPE, defending tribunal proceedings, contractual matters and general employee relations and HR work. She has wide experience working for SMEs, owner-managed businesses and organisations employing in excess of 1,500 staff across the UK.