The status of your employees can have a huge impact on your business – for example, with Auto Enrolment pensions, every employer with a minimum of a single employee could find themselves paying pension contributions. Add to this the potential for litigation, potentially hostile media exposure (Uber and a variety of home delivery firms have received strong criticism from some areas of the press for perceived attempts to ‘dodge’ their duty of care to their workers), and before you know it you have the imperfect mix of factors to consume both your time and your money. It’s far better to get it right first time, and to do that you need to understand the three main types of employment status:
- Employees, who have the highest level of employment protection
- Workers who, although they have several rights comparable to those of an employee, have less legal protection.
- Self-employed workers, who have the least legal protection
So, what are the characteristics of each of these status types? As per https://www.gov.uk/employment-status, as a rule of thumb an ‘Employee’ has the expectation of being given work, and in return, are expected to accept it. They have several important legal rights, starting with receiving the National Minimum Wage, paid holiday and the right to a redundancy payment after two years continuous employment if they are made redundant. There are also other important protections, such as rest breaks and legal protection for ‘whistle blowers’.
If your staff are employed casually, seasonally or on an otherwise ‘as-and-when’ basis, they are likely to categorised as workers. Although workers have several of the same protections as employees (the right to minimum wage, rest breaks, paid holiday and other statutory protections), the employer is not obliged to offer them continuous work, and the worker is under no obligation to accept it when offered. They are usually also not entitled to redundancy pay, minimum notice periods if their employment is coming to an end, or protection from unfair dismissal. Worker status is more flexible for both the employer and the employee, but comes with more worker protections than that of a self-employed contractor.
Self-Employed workers, on the other hand, have very few protections and are largely not covered by employment law. As expected, protection of their Health and Safety is still obligatory and in some circumstances they may also have protection from discrimination. Essentially, someone who is self-employed has their rights and their responsibilities laid out in their contract with their client.
This is one of the areas of employment law where getting it right before you employ people is far less expensive and time consuming than trying to unpick a potential legal mess if you get it wrong. You may well feel that your situation is cut-and-dried and simple to understand, but merely stating that someone is self-employed on a contract is unlikely to convince a court if the characteristics of the job the person is doing imply that they are actually an employee.
It is evidently worth giving this important area some thought prior to creating any new job advertisements or, indeed, creating any new roles. You may have areas of your business that are seasonal, or perhaps have projects coming up that are likely to have a defined beginning and end – in this scenario, workers or self-employed contractors may be the best option for your business. It is worthwhile taking the time to assess your business needs throughout the year, identify peak and trough periods and decide systematically whether employees, workers or self-employed contractors are right for you. It may be that you need a mix of all three, which may possibly make things more complicated to begin with, but allow you more flexibility to adapt to change within your business in the long run. While good planning is important, not every situation is predictable and being able to react to demand promptly is vital.
In short, it pays to protect your business at an early stage and not allow quibbles or confusion about employment status to blow up into an actual dispute – this can be a protracted, expensive and horribly time consuming affair, not to mention the potential bad publicity for your business. While effective management and good employee relations are undoubtedly extremely important in preventing this from happening, if you have any doubts about the details, wording or legality of the contracts that you have with staff or contractors, it’s far better to ask for advice prior to problems arising.