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Engaging workers on a self employed basis? Here’s what you need to know

A growing number of companies are using self-employed workers to help fill gaps in the workforce and to cover different shift patterns. Whilst these workers offer a great degree of flexibility to suit the needs of the company, it is important not to blur the lines on self-employment.

In September, the issue of using self-employed drivers was thrown under the spotlight when it was revealed that delivery firm Hermes may face an investigation after a report alleged that some of its drivers were receiving below the minimum wage.

A report by MP Frank Field said that Hermes’ practice of engaging its drivers as self-employed workers means that many of them are “paid an hourly rate that is much lower than the National Living Wage”. It has resulted in business minister Margot James requesting that HM Revenue and Customs look into what arrangements Hermes has in place.

Mr. Field’s report includes complaints from 78 current and former Hermes couriers who said that their monthly earnings, after petrol costs, were less than £6.80 an hour – 40p an hour below the National Living Wage. His report also claimed there was “serious bullying from some of the middle-men and women who manage the operation for Hermes and who seem to be enforcing an employee contract under the cover of self-employment”.

Employed or self employed?
In terms of establishing whether your company can engage someone on a self- employed basis, it is important to remember that self-employed people are not under the control of the employer. Someone who is genuinely self-employed is able to choose his or her working hours and can work for other companies, meaning that employers cannot lay down the law. Employees, on the other hand, enjoy the most employment rights because their working relationship means they are under the control of their employer and have little say in their contractual rights.

If, following an analysis of the everyday working relationship between Hermes and the delivery personnel, they are found not to be genuinely self-employed, then they would be entitled to national minimum wage for future shifts and will also be able to make a claim for back pay.

Key considerations
In the eyes of an employment tribunal, a contract, which identifies someone as self-employed, will not stand up if the everyday relationship is in any way contradictory with self-employment. It isn’t enough to say that the individual pays their own tax and NI contributions, and, when examining the nature of an employer/employee relationship, a tribunal would consider whether there is an obligation on the employer to provide work and an obligation on the individual to accept it.

The ability of a self-employed person to nominate a substitute to carry out the services can be an important factor in determining status – and any restrictions placed on the ability to do that may mean that the person is not actually self-employed, so far as a tribunal is concerned. The extent to which the individual inherits cost and risk in the provision of services is also relevant.

It is also important to remember that, over time, a self-employed individual’s status may change. This might occur where an employer consistently allocates work to an individual, which may cause the nature of the relationship to evolve into something more comparable to employment, with potentially significant implications in terms of their rights during the relationship and on termination.

It is important to be honest with workers from the outset and to put in place the correct agreement, which suits the needs of the business. Ensure that your records are kept up to date and include details of work patterns and frequency of engagement of any self-employed workers. Remember to review the working relationship at appropriate intervals to ensure that a worker’s status hasn’t evolved into that of an employee.

It is also crucial to take a consistent approach to employment and the minimum wage, as failure to comply with such regulations can result in penalties, as well as damage to a company’s reputation, which may be difficult to repair.

Should you require any further information on this subject, please get in touch with our head of employment, Jonathan Dale

This article was first published in Transport Monthly magazine

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