In part one of this post (read here) I talked about the surprises and shock results (political, business and celebrity) that 2016 has given us (so far). We looked at how many of these will have far-reaching consequences, touching lives and businesses beyond the decisions themselves and often in unforeseeable ways. In the case of the recent Uber tribunal, determining that its drivers are ‘workers’ not ‘self-employed’, the effects on small businesses could be very significant indeed.
The who, what, and how of employment categorisation:
The complexities and details of categorisation are immediately evident when you consider that it took over a year for the Uber employment tribunal to be resolved. And even now the process of appeal is only just beginning, so the saga will continue for a while longer yet.
Despite those intricacies, I am going to attempt to bring you a little clarity on the subject. There are three basic types of employment arrangement that you, as an employer, can use to engage someone’s abilities and hours: employees, workers or self-employed (freelancers and contractors). The UK’s employment law guidelines must be applied to determine which category each person or role falls into and, as a result, any benefits or rights that the employer is obliged to provide. These are the basic identifications:
IMPORTANT note: tax law and employment law are different and (as ridiculous as it may sound) it is possible to be in one category under one law and a different one by the other. Yes, I know…
Everyone who is considered an employee should have signed an employment contract and are bound by its contents – as long as they are legal and reasonable.
- All employees are ‘required’ to work agreed hours unless signed off for holidays, sickness or maternity, etc. and they are paid accordingly.
- The employee and only that specific person can fulfil the role; meaning they can’t send a replacement to undertake their duties in their place.
- The role or work that an employee does is determined solely by the company they work for (via a procedure or a supervisor’s directive), dictating how and when it must be completed.
- Employees are entitled to join the company’s pensions scheme and redundancy arrangements but are equally subject to formal grievance or disciplinary procedures.
In reality, this is just touching the surface, and even the Government descriptions are full of words like probably, likely to, and generally…
People are considered to be workers if they have agreed on a contract (written or verbal) to fulfil a role or undertake work in exchange for payment.
- The worker is usually obliged to make themselves available for the work, and the employer (or customer) is equally responsible for ensuring that any agreed work is present.
- In most cases, workers can decide on when and how they work, but there is usually some sort of agreed standard or result that should be delivered in the end.
- All workers are entitled to the national minimum wage and may even be given holiday pay entitlements and other benefits: but not to the same level of an employee
There is a lot of ambiguity in these definitions and how they are applied, with the decision often being made on a case by case basis.
Someone who provides services via their own business (Limited Company, Partnership or as a Sole Trader), is usually seen as self-employed.
- They can decide who they work for, how they do the work; and where and when the work is completed.
- A self-employed person will provide their own equipment to do the work in question and can even send someone else to undertake all or part of the role. In fact, under some definitions, they ‘must’ be able to send a replacement if they cannot fulfil the need themselves.
- One of the key differentiators for self-employed people is that they should work for more than one customer; although this can also be a case by case factor.
Hopefully, this has given you a little more insight into the complex world of employment law and why it is rarely a straightforward decision. The clearest way forward for most businesses and people is to sit down with a HR professional and create a clear contract that states the precise nature of any working relationship.
Keep an eye on Uber!
The case by case nature of interpreting employment law is why the Uber result could have such a big impact on many small businesses, especially those who employ contractors or work within the ‘gig economy.’ It has effectively set a big precedent of what a worker looks like… and it is certain that this ruling will be referenced in many more cases to come.