During September, Change Recruitment hosted our quarterly breakfast seminars in partnership with MacRoberts Law firm. The following is based on discussion at the events of recent case law surrounding the workers’ rights, the gig economy and employment status.
With all the recent media attention on cases like Pimlico Plumbers and Uber, you may be wondering what exactly is the difference between employees, worker, and someone that’s self-employed? Like most workplaces, you probably outsource some work for freelancers or hire agency workers to cover long-term employee absences like maternity or prolonged sick leave. Maybe you even use “gig workers” to deliver packages or provide services for your business.
It’s important to clearly define and understand the type of workers you use as this will determine their employment rights. As an employer, it’s your duty to make sure workers’ rights aren’t violated as otherwise, you could face employment claims which could significantly cost your business as well as damage your brand’s reputation.
Recent Employment Status Legal Cases
For example, Pimlico Plumbers classed Gary Smith as an independent contractor (i.e. self-employed) despite requiring him to hire a van and wear a uniform with the company’s logo. He also had minimal rights when it came to subcontracting another worker. Under such conditions, despite contractual terms, the Supreme Court ruled, in June 2018, that Mr Smith should have been granted workers’ status which would have entitled him to certain employment rights like sick leave, paid annual leave, protection from discrimination, and national minimum wage.
Similarly, the case against Uber involved whether their taxi drivers were workers or self-employed. Uber claimed that they weren’t a taxi company but rather a technology platform that helped connect taxi drivers with people wanting a lift. While Uber had very well-written contracts with their drivers clearly defining them as self-employed, the court examined the actual relationship between Uber and taxi drivers.
As Uber controlled the type of car drivers could use, the route they could take, and even set the fare, the employment tribunal ruled that drivers were actually workers and thus were entitled to certain employee rights. Uber has since appealed this decision, so the exact outcome of this case is still to be determined. Following the Supreme Court’s decision regarding Pimlico Plumber, a favourable outcome for Uber is unlikely.
So, How Do You Define A Worker?
To determine whether someone is an employee, worker, or self-employed, you’ll need to consider both the individual’s contract and their relationship with their employer. As evident in the above cases, most courts will examine both factors when making this decision, so it’s important that you do too. We’ll explain the fundamental differences between each category to help you understand the type of workers you use.
Employees can typically be defined as a permanent member of staff and usually have an open-ended contract with the employer. Within this relationship, the employer has a significant level of control as they tell the employee what to do, how to do it, and when to do it. There is little or no flexibility regarding when or how employees undertake assignments and certainly cannot ask someone else to cover their work. Employers can also take disciplinary actions against employees and must also pay tax and National Insurance Contributions on employees’ behalf.
Employees are also entitled to more employment rights than workers or self-employed individuals.
- Employees have a right to be paid at least the National Minimum Wage.
- Are protected by working time regulations which govern the number of hours permitted in one week and rest breaks.
- Cannot be unfairly dismissed or unlawfully discriminated against.
- Are entitled to statutory sick pay, maternity or paternity pay and leave, and statutory redundancy pay.
- Have the right to 5.6 weeks of paid annual leave a year.
- Must receive proper notice about the end of their contract.
- Have the right to ask for a flexible schedule.
- And get time off for emergencies related to their family or dependents.
A worker falls somewhere between the duties and expectations of an employee and that of a self-employed individual. They generally have more flexibility regarding how and when work is completed than a worker but are still under the control or supervision of a manager and the employer deducts tax and makes National Insurance Contributions.
It can be difficult to identify the differences between a worker and employee; especially, when workers are undertaking zero hour contracts or are employed through an agency. As Katy Wedderburn, Head of Employment at MacRoberts says “sometimes the only difference between an agency worker and employee is the colour of their lanyard”. To make matters even more confusing, nearly 50% of agency workers have permanent contracts and 75% of agency workers are employed full-time.
Workers aren’t entitled to the full set of employment rights as employees, so some companies try to avoid providing employees with full rights by classing them as workers. It’s crucial to carefully consider whether someone is an employee or worker as giving someone the wrong status could result in lawsuits and end up costing your company valuable time and money. Not to mention, create a bad reputation affecting your ability to recruit the industry’s best and brightest.
HMRC provides a helpful checklist for determining if an individual is an employee or worker. If most of the following are true, then the person in question is most likely a worker:
- The individual has a verbal or written contract that uses terms like ‘casual’, ‘freelance’, ‘zero-hours’, etc.
- Have restricted rights to subcontract work to another individual
- Can choose whether to accept the assignmentA manager supervises their work
- Must agree to the employers t&cs
- Employer deducts tax and pay National Insurance Contributions
- The employer provides the equipment needed to complete the work
- The employer is not a client or customer
Workers are entitled to fewer rights than an employee. While they aren’t entitled to protection from unfair dismissal, time off for emergencies relating to dependents, or statutory redundancy pay, they ARE entitled to the national minimum wage and unlawful deductions from wages. Employers must abide by working time regulations and provide workers with at least 5.6 weeks of paid holiday. Workers are also protected for “whistleblowing” and from unlawful discrimination. Depending on the circumstances of their employment, workers may also be entitled to statutory sick, maternity and paternity, adoption, and parental leave and pay.
It’s generally easier to identify someone that’s self-employed. Again, this goes back to the very nature of the relationship. With self-employed people or contractors, they’re generally running their own business and thus the other party involved is a client or customer. As someone running their own business, they’re ultimately responsible for the company’s success (or failure), must pay taxes, and have complete control over how, when, and where they provide their services.
Since an individual that’s self-employed is essentially their “own boss”, they’re not entitled to most employment rights like sick pay or annual leave. However, they still have the right to be protected from anything that could harm their well-being within the client’s workplace and sometimes have the right to be protected from discrimination. Generally, additional rights are laid out in the contract governing their relationship with the client or customer.
Find out More
Learn more about employment law by attending our next breakfast seminar. Hosted in conjunction with MacRoberts Law Firm, our workshops will help you stay up-to-date on the latest case laws and development within the recruitment industry. Check our events page for details on upcoming breakfast seminars and other events.