What is the effect of the recent cases against Uber, Addison Lee, CitySprint etc?
People who work for organisations fall into several categories. From a legal point of view there are three categories: self-employed contractors, workers and employees, a distinction which matters because different categories have different entitlements. Employees have a whole raft of employment rights including sick pay and maternity leave, workers have some employment rights including the right to be paid the minimum wage and the right to paid holiday whereas self-employment contractors have minimal rights such as the right not to be unlawfully discriminated against. Just to confuse things, HMRC only focus on two different categories: those subject to PAYE and those who are responsible for paying their own tax.
The Uber and other cases arose because so called self-employed individuals brought employment tribunal cases claiming holiday pay and breaches of the National Minimum Wage legislation. So far, tribunals and appeal tribunals have decided all cases against the organisations, deciding that self-employed individuals are in fact workers. These are therefore dangerous times for organisations engaging freelancers.
So, how can you protect your organisation?
The best way to engage freelancers is through a limited company rather than to engage them personally. This offers protection for companies for now. However, this may change over the next few years with recent developments placing responsibility on public sector organisations to deduct and pay tax and NICs where it is clear that there is a potential IR35 infringement. If it isn’t possible to engage through a company, organisations should avoid exercising too much control over the way the freelancer works and should consider whether you can allow the freelancer to send a substitute to do the work.
It is very important to have a contract with your freelancer, not least to protect your confidential information and intellectual property, but this document should reflect what happens in practice and should not be a “sham”.
If you would like to avoid unnecessary risk to your company by thinking through the nature of your relationship with your freelancers, please contact Caroline Banwell.