Are you really self-employed? The Employee v the Self-Employed

What is the difference between being self-employed and employed? Do you know your rights?

You may have seen a recent news article featuring four London delivery cyclists bringing a claim to the Employment Tribunal, whose aim is to successfully argue that they should in fact be employees of their respective companies and therefore have the same rights as employees - as provided for under the Employment Rights Act 1996.

The cyclist’s argument is that they are indeed employees due to being restricted to work for one company. The tribunal is due to meet in November.

Self-employment is increasing and according to the Office for National Statistics, there are around 4.64 million of you out there freelancing and with figures set to rise, it is therefore important you know your status and how certain rights may be affected.

Employees are entitled to employment rights such as receiving paid holiday, sickness and maternity/paternity rights, unlike the self-employed. They also have protection from redundancy and unfair dismissal claims if they have worked with the organisation for more than two years with continuous employment.

Freelancers do not have access to any of these rights and  are limited to claims which are in breach of  contract.

How do you distinguish between a genuine employee and a freelancer?

An employee is someone who works under an employment contract, which typically sets out their pay and other benefits. This includes holiday and any rights to pension entitlements and life insurance for example, as well as a bundle of terms and conditions. A freelancer on the other hand works with the organisation under a contract for services and will be paid usually when an invoice is raised and submitted by the freelancer, generally once those services have been performed.

Next, an employee has an agreed set number of hours they are required to work each week or month and for an agreed remuneration package. A freelancer generally sets their own hours and will only be paid when they work. Unlike an employee, a freelancer is not entitled to paid holiday.

PAYE also needs to be considered, a freelancer is responsible to pay their own tax and national insurance contributions. An employer is obliged to deduct PAYE and national insurance contributions, thus paying the employee net of their salary.

What makes someone a freelancer?

There is no set definition as to what constitutes a freelancer in order to help us determine an individual’s status. However, there are varying factors to be considered and these include how restricted the individual is in terms of where they work, how long for and the type of work they do. If the freelancer is provided with any benefits, do they supply their own tools and do they set their own tasks.

What should employers do?

As an employer, you should be aware of consequences should you not fully recognise an individual as an employee within your organisation. If in fact an individual is recognised as an employee, you may be at risk of HM Revenue & Customs seeking to recover PAYE in addition to any penalties and interest that may have accrued. There may also then be the potential for any employment tribunal claims.

If you require any assistance in determining whether or not an individual within your organisation is an employee or if you are a freelancer but you have an indistinctive role, please do not hesitate to contact us and we would be happy to assist.