Self-employed v Employee Update

Changes to tax laws surrounding self employment and IR35 have caused a bit of an uproar and 170,000 self employed workers face paying up to £7,500 extra year tax under new employment laws. Alongside this, we have seen further cases coming up on the employed v self employment debate since we discussed the case of Pimlico Plumbers v Mr G Smith back in July 2018.

A recent tribunal case has questioned again whether an employee is actually self-employed. The Claimant is a hairdresser who has her own chair in a salon however due to working conditions she claims that she was employed by the Respondent. It is argued due to her holidays having to be booked in advance, that no one else could step in if she was unable to attend work and that she had to use their branded products that she was employed. The case has yet to go to tribunal so we will have to wait and see…

What does this mean for me and if we have people who are self-employed?

The Pimlico decision does not mean that you cannot operate a business model using genuinely self-employed contractors. A close analysis of your contractual arrangements and working practices will help to identify any risk areas and enable you to identify any changes which might be appropriate or any unforeseen costs which might be incurred.

When looking at whether a person is self-employed or not, it’s important to consider the 2017 Taylor review and the recommendations outlined:

  • 
New legislation with clearer definitions of employment status emphasising the importance of control and supervision of workers by a business, rather than focusing on whether the individual can appoint a substitute, to distinguish between workers and the genuine self-employed.
  • Individuals should be assumed to have ‘worker status’ by default in businesses with a workforce over a certain size.
  • A requirement for a clear written statement of a worker’s rights and entitlements to be provided within seven days of the start of their engagement.
  • 
Businesses that benefit from a flexible workforce should either guarantee a number of hours per week or pay a premium national minimum wage level to compensate for uncertainty.
  • Higher punitive fines and costs orders for businesses that falsely classify workers as self-employed and have already lost a similar case.

When questioning if a person is employed or self-employed there are several tests the courts will consider determining the facts of the case. This shows a great importance for a contract to outline the relationship and agreement between the parties.

If you are unsure, please contact a Legal Advisor to discuss further.

Should you have any questions feel free to reach out to our help line. DLP advisors are available to answer any questions you may have—24 hours a day—at 0330 400 4454.

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