There are three categories of individuals providing their services – employee, worker and self employed independent contractor. The distinction can be important for a number of reasons including:
- What terms might be compiled into the contract
- Legal protection and the right to redundancy pay
- The application of the ACAS Code of Practice on Disciplinary and Grievance Procedures
- The application of the TUPE regulations
- Statutory duties owed by the employer
In many businesses, workers sign contracts specifying if they are employed or self-employed contractors.
The Employment Tribunal will look beyond the wording of the contract to see the reality of the working relationship.
If the individual can be hired and fired, if the business controls the way that the individual undertakes the role, is paid exclusively by the business, is provided with tools and transport by the ‘employer’ and has to provide the work personally (cannot send a substitute) – the Tribunal is likely to conclude that the individual is, in fact, an employee or a worker.
The worker will then have the rights that an employee or a worker would have. The Tribunal will not be persuaded by words used in one document if the reality of the relationship between the parties suggests a different status.
This has significant tax implications for the Employer, as well as possibly giving rise to Employment Tribunal claims should the relationship be terminated.
Recent changes to the law have introduced a new employment status of Employee Shareholder. Here an employee agrees to forego some employment rights in return for shares. There are strict requirements for such a relationship to exist. We are able to advise you in relation to these requirements.