You may have heard in the press recently discussion around workers’ rights following some high profile court case in which the debate around when a self-employed contractor becomes a ‘worker’ therefore gaining associated rights.
There have been a number of recent cases which have challenged this and in all cases the claimant has won. The most high profile of these is the case of Uber whereby a tribunal established that Uber Drivers are ‘workers’ and are entitled to worker rights.
Although Uber is in the process of appealing this decision the tide of claims seems to indicate it is unlikely to be overturned.
What are the implications of getting it wrong?
If a contractor successfully launches a tribunal against you and is deemed to have worker status they are a number of things you need to consider:
- The worker becomes entitled to rights that may affect their future pay including national living wage, holiday entitlement, sick pay, pension contributions and other contractual benefits you offer your employees.
- You may have to compensate them for the rights that they have lost. This could include a claim for failing to receive the national living wage (going back 2 years or for 6 years if they have left the company and can claim breech of contract). They may also be able to claim holiday pay back to the start of the contractual relationship (following a recent ruling).
- You may be fined and named by the HMRC for failing to pay national living wage and make appropriate contributions to National Insurance.
- The Pension Regulator may fine you for auto-enrolment failings.
As you can see, the implications of this current theme of tribunal cases can be huge both in terms of money and time however there are things you can do to protect yourself in the future. When establishing contracts for services with your contractors it is important that a number of elements are included:
- Include a genuine ‘Substitution Clause’ in the contracts (meaning someone else can do the work on the individual’s behalf). Currently this would mean that the contractor doesn’t have worker rights based on the recent ruling by the Central Arbitration Committee on Deliveroo’s business model.
- Give contractors full control over their work including their working hours, how they carry out the service and can turn down work without being penalised.
Future Changes to the Law
There are currently two House of Commons Committees looking at this topic, they have issued a report (the Taylor Report) and draft bill on employment status. If the bill became law this could make it necessary to assume all contractors are workers until they can prove otherwise. This will create a requirement for robust policies and procedures to be put in place.
If you feel that there is a problem with your current contracts we can help you. We can audit your current contracts and give you some indicators for improvement. To arrange a review contact us on [email protected] or 01325 288299 (option 2).