The answer to this question will affect a lot more than PAYE and tax returns. Employees have a number of employment rights and protections which self employed workers to do not. For example employees are entitled to statutory redundancy payments, to claim for unfair dismissal, maternity and paternity rights and a number of other rights which do not cover contractors and self employed individuals.
What if the contract says that you are self employed?
It is of little importance, from a legal viewpoint, what if anything the contract between an individual and his client or employer says about his status. The courts and tribunals are interested in what the ‘actual’ relationship is and not what the parties have tried to label it. An employer cannot contract out of his obligations to employees by simply giving them a contract which states that they are self employed.
If the contract is not decisive then what is the test for whether a worker is an employee?
Unfortunately, despite hundreds (if not thousands) of legal cases being heard on this very issue, there is no clear or definitive test. The courts or tribunals have to consider a number of issues in order to draw a conclusion taking into account the overall picture and all of the circumstances in each case. The factors which are considered are:
Mutuality of obligation
Is the ’employer’ obliged to provide work for the ’employee’ and if so is the ’employee’ obliged to do that work? This would clearly indicate that the relationship is indeed that of employer and employee.
Can the ’employee’ send someone else to do the work on his behalf? If so, this would clearly indicate that he is in fact self employed as he is simply providing a service rather than being personally employed to carry out his employer’s instructions.
Can the ’employer’ dictate when, how and by what means the work or job is to be carried out? Again this would clearly be indicative of a contract of employment.
The courts and tribunal will look at all the other factors in the relationship to establish whether they are consistent with a contract of employment or not.
Despite hundreds of cases being heard on this topic each case will turn on its own facts and there is no set formula. You may wish to ask yourself the following questions:
Do you work exclusively for one client?
Do you invoice them for work or do they just pay you?
Do they pay you regularly or by direct debit?
Do you use your own tools or are they provided for you?
Can you send other people in to do your work or are you expected to do it personally? For example if you fancied a day off could you arrange for another person to do the job?
Do you have a regular and consistent work from them?
Do they exercise control over you as to when and how you are to work?
If after asking the above questions you are still unsure about your employment status you should consider taking legal advice and possibly advice on your tax liability position.