Employee, self-employed or worker? – The Bitesized Edition

Authored by DAS

Employment status can be complex if an organisation does not define the relationship with an individual clearly and reflective of the actual relationship in practice. And this needs to be clear at the outset of the relationship and then reviewed on a regular basis.

Often organisations issue a contract, whether that is an employment contract, casual worker contract or contract for services, expecting to rely on just those terms. However, it is not enough even if the individual signs and agrees to the terms. This is where organisations are often caught out.

It is therefore important that organisations, especially those who employ casual workers or self-employed contractors, review their contracts, terms and the relationship in practice on a regular basis.

As most will have seen, Uber suffered a huge blow when it was found by the Supreme Court their drivers were workers, and not self-employed. This meant Uber’s drivers had more employment rights than that of a self-employed individual. Uber owed its drivers holiday pay and, in some cases, the national minimum wage. Uber are not the only employer to have been caught out.

There are a number of things to consider when assessing whether an individual is an employee or a worker. Here is a brief summary of those key tests considered when assessing employment status. 

1. Personal Service

This comes down to whether the individual is contractually obliged to provide their personal service and whether there an unfettered right to appoint a substitute.

2. Mutuality of Obligations

To establish worker status, there is no essential requirement for an “irreducible minimum of obligation”. However, for an employee there will be an obligation on the employer to provide work and an obligation on the employee to accept work.

This does extend to open ended opportunity to work over a certain period of time and it does not require work to be offered when there is no work available.

When considering mutuality of obligations, you will need to look at:

• Length of service;
• The regularity of work;
• The expectation of work being offered in the future; and
• Whether the individual can turn down the work.

3. Control

This will take into account whether the employer has the right to direct what the individual does, such as place of work, hours of work and subjecting them to day-to-day direction, rules and policies.

It is best practice for organisations to undertake risk reviews of the status of those they engage on a regular basis, using the key tests set out above and the update the contracts etc if following these risk reviews the status has changed.