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Business News: Business Aid

John Brookes of local solicitors Dean Wilson LLP answers questions on the difference between being employed and self-employed


I’m interviewing to fill a senior role and one of the best candidates has asked if we will consider hiring them as a self-employed contractor, rather than as an employee. What is the difference?
The key issue in determining whether someone is employed or self-employed is whether the employer or the worker has control over where, when and how the work is done. If the worker has to do the work themselves and is performing a function that is part of regular business, it is likely that they are employed rather than self-employed.

What factors are likely to mean that a person really is self-employed?  
If a person is self-employed they can usually hire someone else to do the work for them and they will provide the main items of equipment they need to do their job.

If they agree to do the job for a fixed price regardless of how long the job may take, and regularly work for a number of different people, this will indicate they are self-employed as can the fact that they have to correct unsatisfactory work in their own time and at their own expense.

Why is it important to determine the difference?
While self-employed and employed people experience different tax treatment there are also important differences under employment law. 

A self-employed person doesn’t get paid annual leave, sick leave or have access to an employer’s pension. They also aren’t protected under employment laws and therefore can’t claim unfair dismissal or redundancy and might receive very little notice that their contract is ending.

It is also important that an employer is legally responsible for the actions of their employees, but a self-employed person is responsible for any errors or mistakes they make. 

What happens if we think we’ve hired someone as self-employed, but we get it wrong?  
Getting the relationship wrong, even if by accident, can prove to be costly, particularly for the employer. If a relationship of employment is found to exist, the employer can be found responsible for unpaid annual and other kinds of leave, unfair dismissal and redundancy costs as well as unpaid PAYE and NI.

As such, if there is any uncertainty about what the nature of the working relationship is, it is always best to check first to avoid costly and time consuming mistakes.

John Brookes has recently joined Dean Wilson and has over 18 years of experience in both the UK and North America, advising both commercial and individual clients facing issues arising from TUPE and employment transfer, terms and conditions of employment, contract and employee management.