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Employed / Self Employed

What is the test for employment and self-employment?

There is no single test that determines whether a worker is employed or self-employed. There are a number of important factors to be considered, but all the relevant circumstances should be taken into account:

  • the primary factor is whether there is a “mutual obligation” for the supply and performance of work. This is the single most important factor. If no obligation exists, then there is no employment relationship between the parties. The existence of this obligation alone may not be enough and a Tribunal can also consider other factors.
  • the purpose of the contract and the intention of the parties when the contract was formed. It is the underlying nature of the agreement and the actual performance that count, rather than the description or label the parties use. Just because the worker is described, or prefers to use, the description “self-employed”, does not mean that is the true legal position.
  • the control exercised by the employer to decide when, where and how work is performed. A degree of autonomy suggests self-employment.
  • the extent to which the worker is obliged to provide services in person, rather than appointing another person to do the work.
  • the extent to which a worker is an integral part of the employer’s operations.
  • the method and mode of payment to the workers

‘Contract workers’, ‘temporary workers’ and ‘casual workers’ may all meet the definition of employee, the significance of which largely relates to the employment rights which go with that status and the taxation implications. If they are an employee and meet the other eligibility requirements, they qualify for unfair dismissal and other forms of employment protection.

It is therefore especially important to obtain advice when documenting the working relationship, so that what is expressed in the contract reflects the parties’ intentions, as well as their respective obligations and liabilities.

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