It has always been a challenge to have a black and white picture of whether staff are employed or self-employed, even when both parties agree that a self-employed status exists between the two. Individuals may prefer self-employment because they are often able to negotiate a higher rate of pay than would be available to an employee, because of the cost benefit to the engager. However, their perspective may change when they lose their job, become pregnant or have an accident. At that point, they may seek to argue that they were employed, and claim unfair dismissal, maternity rights, damages or sick pay from their engager.
School peripatetic staff tend to have no fixed base for work and travel from school to school providing their services, such as music teachers. It is important to ensure that an individual engaged by the school is engaged under the right employment status as getting this wrong can leave the school at risk and open to potential claims, especially when the working relationship breaks down.
Employers and employees have obligations that are implied in the contract between them (for example, the mutual duty of trust and confidence), as well as express clauses they will need to comply with. Some core legal protections only apply to employees, most particularly the rights on termination of employment, such as protection from unfair dismissal, their rights under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and redundancy.
Apart from the points above, the tax treatment of a person providing services depends on their status for tax purposes as determined by HMRC. It is worth bearing in mind that because an individual is considered self-employed by the HMRC does not automatically make them self-employed in the eyes of an Employment Tribunal. This can have serious tax implications for the employer whether the individual is then considered to be an employee and not self-employed. The longer the individual has been employed, the greater the risk.
There are a few things to look out for in determining whether an individual is genuinely self-employed. Firstly, there is no obligation on the individual to do work that is offered by the engager and there is no obligation placed on the engager to provide the work (mutuality of obligation). Secondly, they can be engaged with different organisations at any one time. They will also be in business for themselves and responsible for the success or failure of their business. The right to hire someone else to carry out the work if they cannot do it themselves is also a determining factor (substitution). They can also decide the nature of the work they do when it’s done, and where or how to do it (Control).
As it has become more important to ensure that the correct status is applied from the beginning of the working relationship, we can assist you in reviewing your current employment contracts and service agreements to ensure that you are not falling short of the employment status of those engaged by you.