The viability of many businesses is on a knife edge and flexibility in scaling the workforce up or down at short notice has become increasingly important.
For many employers, keeping their workforce as flexible as possible will be essential for their future. However, the law around zero hours contracts, self-employment, personal service companies and agency workers is complex, and now is the time to take stock of your current arrangements.
Elizabeth Bartle, a partner in the employment team with Ingram Winter Green outlines how to manage the risks and obligations of the different options for a flexible workforce.
Self-employed contractors: watch out for employment rights
Contracting with a self-employed individual may seem like a low-risk option, without adding to the overheads. However, even if you and the individual initially agree that they are self-employed, an employment tribunal may see things differently further down the line. It matters if the working arrangements make them a worker or even an employee in the eyes of the law; a worker has the right to paid holiday, rest breaks and to be paid the national minimum wage, amongst other rights. An employee benefits from the full suite of employment rights. Workers and employees are also protected by whistleblowing legislation if the report certain types of wrongdoing.
Determining if your self-employed contractors can be safely described and treated as self-employed, is not straight forward. Factors include whether the individual has to do the work personally or if they can send a substitute instead. This area of law is crying out for reform, but there is no consensus on how to improve it.
In July 2020, the Supreme Court heard the case of Uber drivers who have so far been successful in their argument that they have workers’ rights. We are waiting for the court’s decision, which has significant implications for gig economy workers, potentially giving many of them rights to paid holiday and the national minimum wage.
We can help you review the arrangements for your contractors and advise how to reduce the risk that the relationship status tips over into one of worker or employee.
It is worth noting that self-employed contractors, who have to personally provide their services, including those providing their services through their own service company are protected from discrimination under the Equality Act 2010.
What do I need to know about tax and the self-employed?
HMRC uses similar (but not identical) tests to employment tribunals to assess if an individual is an employee or self-employed. The category of worker is not recognised for tax purposes. HMRC can recover tax and National Insurance contributions from your business if it believes an individual has been wrongly categorised as self-employed and you have not been deducting PAYE.
In April 2021, it is expected that the off-payroll working rules will be extended to the private sector, having been postponed since April 2020. This means that an individual providing services through a personal services company or a partnership to a medium or large private sector organisation can be deemed to be an employee. If your business falls within the scope of the rules, you need to assess the tax status of your contractors and produce a ‘status determination statement’. Rather than the provider having to account for tax, you may be liable for income tax, paying National Insurance contributions and the apprenticeship levy.
The changes will require a combination of employment law advice and tax advice from your accountants. However, it is imperative that you start thinking ahead given that you may need to have made changes to your arrangements with any self-employed personnel by April 2021.
Can I use zero-hours contracts?
Zero-hours contracts can give you considerable flexibility, even though you cannot require the individual to work exclusively for you. There are considerable restrictions on the operation of zero-hour contracts and so need to be carefully drafted and reviewed to ensure that they comply with the legislation and evolving caselaw.
Agency workers: rights and obligations
The agency is responsible for providing the terms of engagement and key information to the worker. Respond promptly to any questions from the agency about the placement and health and safety, as the agency is obliged to ask these before the worker can start work with you.
For placements of six days or more the agency must confirm information to you, including that the worker has the relevant experience and qualifications. There are additional requirements for placements involving vulnerable persons.
The agency also has to tell you whether it has taken on the individual on a self-employed basis or as an employee. We can review the contract with the agency to ensure it gives you adequate protection, should the agency worker claim to be employed directly by you or bring any claims against you. The contract should also protect you from incurring tax liabilities, particularly if the worker provides services through a managed service company or a personal services company.
Specific rights of agency workers
You need to be aware of the most significant rights for agency workers:
- access to staff facilities on no less favourable terms than other comparable staff, unless you can objectively justify treating them differently;
- to be informed of relevant job vacancies within your business;
- after 12 weeks, to take time off work to attend antenatal appointments or adoption placement appointments; and
- after 12 weeks, to have certain key basic working and employment conditions, including holiday and pay, as if you employed them directly.
We can advise you on whether it is safe to end a placement at 11 weeks to avoid rights kicking in or if you would fall foul of anti-avoidance measures.
We can help you find the best options for a flexible workforce and ensure you comply with the legal framework and the arrangements work well for you. Please contact Elizabeth Bartle in the employment team on 020 7845 7443 or email elizabethbartle@iwg.co.uk. Ingram Winter Green has offices in London.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.