Self employed in name only

March 9, 2012 12:22 pm Published by

The number of people calling themselves self-employed has risen to a record 4.1 million according to the Office for National Statistics. That is 14.2% of the entire employed population. Some of my female friends are among them. In fact 60% of those who have become self-employed since 2008 are women.

There are various ways to work for yourself and around family life – I know people who sell cards, cosmetics, kitchenware, health products and who run slimming groups. Most of the time this work is genuine self employment but that is not always the case. Sometimes a person is not self employed but is actually employed by the business they work for, regardless of what is written on pieces of paper. That matters for tax and NI purposes and for employment rights related to, say, redundancy and dismissal.

One man I met was a car valeter who had been ordered to go home from work after he damaged a car by accident. His pay stopped. He heard nothing more from his workplace. He had worked there for some years and had a ‘self-employed’ contract. But on closer examination he told me that he had to turn up at 7am each morning; the business would never allow him to leave early or send someone else to do the job in his place. In short, he was describing the relationship between an employer and an employee. He could therefore claim unfair dismissal.

Weight Watchers UK is the latest business to find itself in trouble. WW uses ‘Leaders’ to run meetings. The Leaders signed contracts describing themselves as ‘independent contractors’ not employees. They had to pay their own tax and national insurance. The Leaders were only paid if they personally conducted their own meetings and they had to hold the meetings according to WW’s programme at a certain time and place each week. If they were ill or unable to attend a meeting, they had to find a suitably qualified replacement and show a good reason for not attending. The Tax Tribunal decided that the Leaders were not actually self-employed but were employees, mainly because WW exercised so much control over their work and it was so difficult to substitute someone else to take a meeting. WW was their employer and the Leaders should pay tax via PAYE.

This reflects an earlier decision in the Employment Tribunals. So as ‘self employment’ rises and new ways of working emerge, it is clear that the law will move with these changes to cope with unusual or ‘a-typical’ working arrangements.

So if you use ‘self-employed’ or ‘independent contractors’, make sure the paperwork reflects the reality on the ground. If you closely control how, when and where a person works, if you insist on having that person working for you rather than a replacement, you may in reality be their employer with all the tax and legal implications.

The above is general advice only and specific advice should be taken before action is taken.

Sallie Davies is an Employment Solicitor at Blocks Solicitors. Contact her on 01473 343922 or atsjd@blockslegal.co.uk

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