Taking on self employed workers

Utilising self employed workers has many benefits, especially for well defined short term project work. We highlight a few of these here. We also point out what you need to watch for.

The main benefits

  • Employment rights are reduced, especially the right to claim unfair dismissal.
  • This means you can finish the worker anytime. You need to give only that notice that is provided for in the contract.
  • Sick pay can be avoided.
  • Maternity and paternity rights are more limited. They are therefore less disruptive.
  • Auto enrolment is avoided.
  • Overall, administration costs are lower.
  • Employment related costs may also be lower, for example an office may not be needed.
  • You are less committed to the individual (which cuts both ways, of course).

Watch out for

1. Misjudged self employment:

  • Employment status is a complex concept. Mistakes can lead to claims for back-tax or unexpected unfair or wrongful dismissal claims.

2. Data security risks:

  • Self employed workers who use their own computers may not be diligent with anti-virus ware, firewalls, Windows updates, etc.

3. Unlawful discrimination:

  • This can apply to pregnancy. For example discrimination might be claimed if you decide to not renew a contract for a pregnancy related reason.
  • Discrimination can be relevant to a worker who is (or becomes) disabled who can also make a claim if they are unfairly treated.
  • Indeed, self employed workers may be protected from discrimination under any of the “protected characteristics”; other examples are race, age, religion.

4. Health and safety:

  • Self employed workers need to follow health and safety regulations. You have a responsibility to ensure that they do so. They might take risks of which you are, technically, unaware. Nevertheless you could still end up being fined.
  • Risk assessments are required, including for pregnancy.

5. Holiday pay

  • Contrary to expectations, many self employed workers will be entitled to holiday pay. Sometimes this may mean back-pay for untaken holiday entitlement. If you engage “self employed” workers you need to be careful. You could be storing up large debts that may come home to roost if you discontinue using the worker later.

6. Working time regulations:

  • These apply to workers just as they do to employees. Take care if the worker is undertaking work for others. Remember too that travel time between any of your work locations will be included too.

Steps to protect yourself

1.Be clear about who is in control:

  • “Mutuality of obligation” is the main distinction between workers and employees. That is 1. are you under an obligation to provide work and 2. is the individual under an obligation to carry out work that you offer. Answer “yes” to either of these and the individual is an employee; perhaps a zero-hours employee.
  • Who controls matters such as work, hours, location, provision of equipment, etc. Workers generally control these, employees generally don’t.

2. If in doubt, take advice on employment status, it is a complex area:

  • In most cases Employer Solutions can advise you on employment matters. If not, we’ll tell you who can. On tax matters you may be best if you refer to your accountant.

3. If they are working over 48 hours a week then seek a voluntary opt-out agreement.

4. Force a break in employment:

  • There are circumstances in which this can be valuable. Contact Employer Solutions for more detail. In any event it is a wise step so as to avoid the claim that you are obliged to provide work.

Malcolm Martin FCIPD

Author Human Resource Practice

As with other blogs, the information here is for general guidance only.

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