What are the main differences between an employee and a self-employed worker in your organisation? Our Employment law team have created a non-exhaustive checklist which can help you define the workers in your workplace.
Factors indicating employed status
Mutual obligations
The company is under an obligation to provide the individual with regular work and the individual is under an obligation to make themselves available to do the work.
Personal service
The individual is required to provide their services personally. Either there is no right to appoint a substitute or any substitute sent would be subject to the company’s approval and permissible in limited circumstances.
Control
The individual is under the control of the company to such a degree that the company controls what the individual does, how they do it and when they do it. The individual is also expected to comply with the company’s standards of behaviour or dress within the working environment.
Exclusivity
The individual is not normally free to work for other organisations without the express permission of the company. The individual may be subject to restrictions in their contracts (known as restrictive covenants).
Nature and length of the engagement
The length of the engagement is not determined (with the exception of fixed-term contracts) and does not relate to the performance of a specific task.
Pay and benefits
The individual is paid a fixed sum on a regular payment date irrespective of performance targets or completion of a specific task. They may receive a pension, bonus, private medical insurance, company car or other benefit and be entitled to company sick pay.
Integration
The individual is integrated into the company. For example, they perform services which are similar to or substantially the same as those performed by persons acknowledged to be employees. Examples of evidence may also be that their name appears on the internal telephone directory, they have a company e-mail address, they wear uniforms and they have a company business card.
Facilities and equipment
The company provides the individual with the facilities and equipment required by them to carry out their job.
Financial risk
The individual is paid even if there is not sufficient work to keep them fully occupied. The individual assumes no financial risk in working for the company.
Taxation
The individual is not responsible for payment of income tax and national insurance contributions (NICs) on their earnings.
Factors indicating self-employed status
Mutual obligations
The company is not obliged to offer work on a regular basis and the individual has no obligation to accept any work that is offered.
Control
The individual has the freedom to decide when and how they work and is not under the direct supervision of the company.
Personal service
The individual is not required to carry out the services personally and has an unqualified right to appoint a substitute.
Exclusivity
The individual is free to provide their services to whomever they choose without operating exclusively for one organisation.
Nature and length of the engagement
The individual is engaged for a finite period to carry out a specific task or project or type of work.
Pay and benefits
The individual is paid on completion of a specific task or project or on a commission-only basis. They are not entitled to participate in any benefit schemes and will not normally be paid overtime.
Integration
The individual is not sufficiently integrated within the company to have a defined role and does not perform services similar to or substantially the same as those performed by an employee.
Facilities and equipment
The individual provides their own equipment and materials in order to perform the services.
Financial risk
The individual risks their own capital in their own business and will be personally responsible for any losses arising from their work. They may be required to correct any unsatisfactory work in their own time and at their own expense. Conversely, they may have the opportunity to profit from the success of the project.
Taxation
The individual is responsible for payment of their own income tax and NICs on their earnings and is responsible for registering for VAT if the level of their supplies exceeds the relevant registration limit.