HR BLOG: Employed, or self -employed? That, is the question.

How businesses take on workers has come under the spotlight, with the government announcing an Employment Practices Review. And about time too! With zero-hour contracts, casual staff and so called ‘self-employed staff’, there is a lot to investigate.

If your business uses self-employed people, this makes essential reading. We’re going to tell you what’s happening, why, and what you should consider doing down the line to keep your business safe.

Many companies, particularly when they start needing additional staff, persuade potential workers to become ‘self-employed’, when really they should have employed status. This undermines government attempts to introduce the National Living Wage and auto-enrolment for a start, and denies the worker employment benefits such as Statutory Sick Pay, paid holiday and maternity or paternity benefits.

HMRC will be delighted that this has been prioritised, as when companies take on these so called self-employed individuals, they avoid Employer’s National Insurance Contributions and deducting income tax at source.

Responding to this, the government are clearly attempting to tackle a sizeable shift in favour of the ‘gig economy’. 9 in 10 new job roles are described as self-employed, and Theresa May supports an estimate that there’re almost half a million wrongly classified working Brits. It will be interesting to see the outcome of the Uber tribunal case.

So how can you protect your business? Providing the individual with a self-employed contract is not enough. It is all about the nature of the relationship.

One of the major tests is if the individual has to perform the work personally or if they can substitute someone else. If they use your tools and equipment and they are subject to your disciplinary rules it is another pointer to employed status. Do they work for someone else and keep records of all their transactions?

It is not just HMRC that employers should worry about. As these issues become more widely discussed in the press, the workers themselves will question their employment status. Whether, in the long run, the promises of perhaps more hours and more flexibility is really worth sacrificing their employment rights for. They may, backed by a Union, take out a Tribunal claim for holiday pay. And so they should!

Being a good employer means treating people fairly, and this we believe is one of the fundamentals that makes businesses successful. The reputational damage to Sports Direct due to its employment practices has shown the flip side to this.

That is not to deny that there are many cases where truly self-employed freelance contractors and consultants are an asset to your business. But you need to be confident that you are legally compliant. The HR Dept can help you there.

Alison Schreiber runs The HR Dept Durham and Darlington franchise, and works with a number of businesses across PBP. For more info, visit HR Dept Durham and Darlington or call Alison on 01325 526036 or 07535 853226.