In recent years, new ways of working and business models, such as the gig economy, have led to confusion regarding workers’ employment status and the rights and responsibilities they hold with their employers.
As a result, employment status has become a common focus of tribunal cases. For example, the landmark case of Uber v Aslam reached the Supreme Court in 2021. The ruling found that the claimant drivers should be classified as ‘workers’ rather than self-employed drivers, emphasising the importance of determining employment status. As a result, similar companies in the gig economy could face future legal challenges. According to research by TUC, around 5 million were employed in the gig economy in 2019. It is more important than ever to ensure you know the employment status of your workforce.
You can read the full details of the Uber v Aslam course in our case law summary: Uber v Aslam in the Supreme Court – Decision
To support you, this article will outline the factors you need to consider to determine employment status.
What are the different ways of engaging a workforce?
Broadly speaking there are three categories in which companies engage their workforce as follows:
Employee – employees are entitled to all statutory employment rights. These rights are vast but include the right not to be unfairly dismissed, the right to the minimum wage, the right to take family-related leave such as maternity and adoption leave and much more.
Self-employed – there is no employment contract with self-employed people, and they are not afforded any statutory employment rights. The company pays the individual a fee rather than a salary, and the individual is responsible for running their own business.
Worker – a ‘worker’ is neither an employee nor self-employed, but s/he does have some employment rights such as the right to the minimum wage, the working time regulations and part-time workers’ regulations. However, their employment rights are limited, and they are not afforded the same protection as employees.
How can these categories be challenged in court?
Whilst it appears easy to distinguish between the different categories, when a claim is made, the courts do not just rely on what is stated in the employment contract. They will apply weight to what happens in practice and the behaviours that the company and the individual exhibit. Whilst the contract may say that an individual is a worker or self-employed, how the arrangement operates, in practice, may be quite different, which could bring about a successful claim.
What factors are taken into consideration?
You may be questioning the employment status of individuals within your company. If so, previous case law has provided some helpful guidance to help determine the employment status of different groups, as follows:
- Who decides what the work will be?
- Who decides the way the work will be done?
- Who decides the means to be used?
- Who decides the timescales?
- Who chooses and removes the people in the team?
- Who provides the equipment and materials?
As well as the guidance above, other influential elements can help to determine employment status. These are:
- Anything that suggests employment. Examples of things that would indicate employment would be disciplinary and grievance procedures and the payment of holiday and sick pay.
- If the individual has their own staff. If the individual has their staff, it is more likely to indicate a self-employed arrangement.
- The number of clients. If the individual provides their services to a number of clients, they will likely be deemed self-employed.
- The negotiation of fees. Where an individual negotiates different rates for each job s/he does, they are more likely to be found to be self-employed.
What should you do?
It’s essential to understand the employment status of your workforce to know your responsibilities around statutory employment rights. Failure to get this right could result in costly legal challenges.
- Ensure that you choose the most appropriate contract type when engaging someone for work. Use the guidance above to determine this.
- When setting up the contract, be that for an employee, worker or self-employed, make sure it is very clear about who is responsible for what and the employment status of that individual. Without a contract, a tribunal can only rely on practice, which may differ from your intentions.
- Carry out an audit of the existing contracts you have in place and take steps to make the employment status clearer if needed.
- Make sure that the practice matches the contract. As stated earlier, tribunals don’t only look at the contract type; they also consider the behaviours and practices between the company and the individual if the employment status is being questioned.
If this article has highlighted any issues in relation to your own organisation, please do not hesitate to contact us. You may also find the following resources relevant:
