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JPP Law Blog

Employees, workers or freelancers?

With Covid-19 resulting in a sudden reduction of work for many businesses some employers may be considering whether to staff their businesses differently in the future. There is a superficial attraction to using freelancers or contractors rather than employing people as there is no obligation to provide any work (and therefore no fixed salary payable) to freelances or contractors. However, businesses should be aware that seeking to re-label an employment relationship as one of self-employment will not be effective and can result in claims in the employment tribunal as well as back taxes, fines and penalties being due to HMRC.

For someone to be genuinely self-employed there cannot be a mutuality of obligation between the parties i.e. the business can't be required to provide work and the individual should be free to accept or decline any work offered to them.  That must be the reality not merely what is set out in a contract. The right to send someone else to do your work is common in genuine contractor relationships but entirely inconsistent with an employment arrangement. Businesses should not exert control over contractors as they would employees.

There is a middle category of individual who has some rights but not full employment rights - these are workers. Examples of their rights include paid holiday, limits on their working hours, entitlement to national minimum wage, protection from discrimination and the application of TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006).

There have been several high profile cases of recent years which have held that Uber drivers and various delivery couriers as well as an out of hours GP were actually workers although they were engaged on contracts which described them as self-employed. These cases have shown that this can be a very expensive mistake to make particularly if the business model depends on not covering the costs involved in engaging workers or employees.

While the situation is likely to involve a consideration of which law should be applied and where an employee should pay tax, the fact that someone works from another country doesn't automatically prevent them from being an employee or worker under English employment law.  If businesses are considering employing or engaging staff based in other countries as well as assessing the risks of the application of English employment law they need to take local advice to understand local rights which the individual will have and to assess the liabilities to tax and social security payments.  While it may be possible to use a contract governed English law, that will not prevent local mandatory rights applying and some clauses which we typically use may be legally ineffective in other countries.

For further advice on any of the issues raised in this article, or for Employment Law advice more generally, please contact JPP Law on 020 3468 3064 or email info@jpplaw.co.uk.


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