Indicators of Employment (As Opposed To Self-Employment)

Indicators of Employment (As Opposed To Self-Employment)

1. Mutuality of obligations and control over the worker

Significant indicators will be if there is “mutuality of obligations” (i.e. the ‘employer’ is obliged to provide work and the ‘employee’ is then obliged to perform a reasonable amount of that work) and if the worker is implicitly or expressly subject to a significant degree of control from the ‘employer’. Essentially, the greater the level of control the ‘employer’ has over the worker, the greater the likelihood that he or she will be considered to be an employee.

2. Personal service

An essential element of a relationship of employment is that the worker provides personal service. If the worker undertakes to perform a task and is free to hire someone else to do it or to give them substantial help, it is unlikely that the worker is an employee. This is a very important factor to take into account in any case when looking at whether or not someone is employed. When considering whether the worker has to provide personal service, the test is whether or not the worker has a right to provide a substitute for themselves that is important, not whether they exercise that right (but see Working Through an Intermediary Company and IR35 as to how in the context of IR35, as an exception to this, exercise of the right is also important). In order for there to be a possibility that the worker is in reality self-employed, the worker must have a real choice over who does the work and the substitute must be answerable to and paid by the worker. The fact that a client can limit the choice of substitute to a suitable person does not necessarily mean that there is no real right. However, if the client has an unlimited right to veto over substitutes then this may mean that the reality is that the worker has to provide the services personally and the right of substitution is not genuine.

3. Other indicators

Someone who works for another is probably their employee, and not self-employed, if most of the following are true:

  • They are required to work regularly (unless they are on leave, e.g. holiday, sick leave or maternity leave); 
  • They have to do a minimum number of hours and expect to be paid for the time worked; 
  • A manager or supervisor is responsible for the worker’s workload and decides when a piece of work should be finished and how it should be done;
  • The person / organisation engaging the worker deducts tax and NICs from the worker’s wages;
  • The worker gets paid holiday;
  • He/she is entitled to contractual or Statutory Sick Pay, and maternity or paternity pay;
  • They can join the pension scheme of the business which engages them;
  • The disciplinary and grievance procedures of that business apply to them;
  • They work at that business’s premises or at an address specified by that business;
  • Their contract sets out redundancy procedures;
  • Is they are provided with the materials, tools and equipment for their work by the business which engages them;
  • They work only for that business or, if they do have another job, it is completely different from their work for that business;
  • Their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’.

If most of the above do not apply, it is likely that the worker is instead self-employed.