Employee, worker or self-employed? The definitions can be confusing, but get it wrong and you could have a law suit on your hands, explains DAVID WRIGHT

Staff Strategy

There have been several cases over the past two years of self-employed individuals claiming they were in fact employees and should be entitled to rights such as holiday pay or the minimum wage. Often it has been ruled that the individual should be classed as a worker rather than an employee. Still a victory for the claimant but what is the difference? There are many self-employed individuals in the beauty industry, whether they provide specialist services or rent a room. If they were found to be workers, then immediately they would be entitled to up to 28 paid holiday days a year.

What’s the difference?

An employee has a contract of employment, whereas a worker must “undertake to do or perform personally any work or services for another party to the contract whose status is not that of a client or customer”. It sounds complicated but basically the person has to do the work themselves and the client isn’t seen as their customer.

In general terms, for someone to be an employee, the following three criteria apply:

• They provide services personally, rather than being able to send a substitute to carry out the work in their place

• The employer must provide them with work and they are obliged to do that in return for an agreed wage on terms laid down by the employer

• The employer must exercise a sufficient degree of control over the manner in which the individual carries out the work.

What is a worker?

If the criteria above aren’t met, the individual is going to be a worker or self-employed. Individuals are not employees if they are free to accept or reject work.

Workers are entitled to rights including minimum wage, holiday pay, protection against discrimination and the right not to be treated less favourably if they work part-time. However, a worker cannot claim unfair dismissal or redundancy payment.

Self-employment

Self-employed people have virtually no employment rights. They are running their own business so choose their hours, services and fees.

There is not a single list of criteria which identify someone as self-employed but if they have to do the work themselves, wear a uniform and work fixed hours, even if there aren’t any paying customers, this is not consistent with being self-employed. Another relevant factor the courts look at is mutuality of obligations – this means the individual can be offered work and there are no sanctions if they don’t want to do it.

Still confused?

It isn’t surprising, I deal with lots of self-employment arrangements and sometimes have to challenge my clients to tell me what distinguishes their selfemployed person from an employee or worker.

An example probably helps. In the original Uber case, the drivers were found to be workers, not self-employed, and the reasons why can easily be compared to the arrangements for your self-employed staff. Uber, not the drivers, made the bookings, retained passenger data, set the route and prices, handled complaints and decided upon rebates. Uber also interviewed the drivers for suitability and made it mandatory to accept trips. Conversely, if you’re self-employed, you decide how much to charge for your work, how much holiday to give yourself and when you are available to work.

David Wright is a consultant in all aspects of employment practice and law. He is the main employment law consultant for Habia and provides a personalised support service for UK salons.

Tel: 01302 563691 davidwrightpersonnel.co.uk