July 2018 - Employment Status: What does it mean & how does it work in our sector?

There is currently a lot of debate (and quite a few law suits) over the different types of working relationships that exist in the UK. Employment law recognises three categories:
• Employees who have full protection under the law.
• Workers who have limited rights.
• The Self-Employed who are not protected by employment law.
For tax purposes, however, HM Revenue & Customs only differentiates between the Employed and the Self-Employed.

To mix things up even further, in the entertainment sector most Performers and some Stage Managers are considered as Workers for employment law purposes but Self-Employed for tax and NI. It’s not just our industry that is apparently contradictory, a swathe of cases about the status of “gig economy” workers, such as Uber drivers, Deliveroo deliverers and Pimlico Plumbers have brought the details of these definitions under the microscope. It’s likely that the law will change, in the meantime, here is what it looks like now.

Employment Law Definitions

An Employee works under an employment contract. Hallmarks of Employee status are -
• Working regularly unless on leave, e.g: holiday, sick leave or family friendly leave.
• Working a specified number of hours and being paid for time worked.
• Being managed or supervised, told how and when work should be done.
• Not being able to send someone else to do their work.
• Having tax and NI contributions deducted from their wages.
• Getting paid holiday.
• Being entitled to Sick Pay, and maternity, paternity or adoption pay.
• Being eligible to join the business’s pension scheme.
• The business’s disciplinary and grievance procedures apply to them.
• Having to work at the business’s premises or at an address specified by the business.
• Their contract sets out redundancy procedures.
• The business provides the materials, tools and equipment for their work.
• Their contract uses terms like ‘employer’ and ‘employee’

Employee’s rights: (Some rights require a minimum length of continuous employment) -
• To be paid at least the National Minimum Wage
• Protection against unlawful deductions from wages
• At least the statutory minimum level of rest breaks and paid holiday
• To not work more than a 48 hour average week or to opt out of this right if they choose.
• Protection against unlawful discrimination.
• Protection for ‘whistleblowing’ (reporting wrongdoing in the workplace).
• To not be treated less favourably if they work part-time.
• Statutory sick pay.
• Statutory maternity, paternity, adoption and shared parental leave and pay.
• Minimum notice periods if their employment will be ending.
• Protection against unfair dismissal.
• The right to request flexible working.
• Time off (unpaid) for emergencies.
• Statutory Redundancy Pay

A Worker is generally someone who:
• Occasionally does work for a specific business
• Doesn’t have to be offered work and doesn’t have to accept it. However, they do have to turn up for work that has been arranged even if they don’t want to.
• May not have a contract, if they do it will use terms like ‘casual’, ‘zero hours’, ‘as required’.
• Works under supervision or control.
• Can’t send someone else to do their work.
• Has tax and NI contributions deducted from their wages.
• Is provided with the materials, tools or equipment they need to do the work.
• Is eligible for pension auto-enrolment.
• Isn’t doing the work as part of their own limited company.

Workers’ rights: Workers are entitled to some, but not all, employment rights. They get:
• The National Minimum Wage
• Protection against unlawful deductions from wages.
• The statutory minimum level of paid holiday.
• The statutory minimum length of rest breaks.
• To not work more than a 48 hour average week or to opt out of this right if they choose.
• Protection against unlawful discrimination.
• Protection for ‘whistleblowing’.

Workers usually aren’t entitled to:
• Minimum notice periods.
• Protection against unfair dismissal.
• The right to request flexible working.
• Time off for emergencies.
Statutory Redundancy Pay.

A person is Self-Employed if they run their business for themselves and take responsibility for its success or failure. The Self-Employed aren’t paid through PAYE and don’t have the employment rights and responsibilities of Employees. Employment law doesn’t cover the Self-Employed, however, they still have work-related protection under Health and Safety legislation and some protection against discrimination.
Key hallmarks of Self-Employment are:
• Putting in bids or give quotes to get work.
• Not working under direct supervision.
• Submitting invoices for payment.
• Being responsible for paying their own National Insurance and tax.
• Not getting holiday or sick pay when they’re not working.
• Having a contract that uses terms like ‘self-employed’, ‘consultant’ or ‘independent contractor’.

Full details https://www.gov.uk/employment-status

Tax Law Definitions

Someone is Self-Employed if most of the following are true -
• They’re in business for themselves; are responsible for the success or failure of their business and can make a loss or a profit.
• They can decide what work they do and when, where or how to do it.
• They can hire someone else to do the work.
• They’re responsible for fixing any unsatisfactory work in their own time.
• They receive a fixed price for their work that doesn’t depend on how long the job takes.
• They use their own money to buy business assets, cover running costs, and provide tools and equipment for their work.
• They can work for more than one client.

Someone can be both Employed and Self-Employed at the same time, for example if they work for an employer during the day and run their own business in the evenings.

You can check someone’s employment status at https://www.tax.service.gov.uk/check-employment-status-for-tax/setup however this checker does not give a definitive response for many roles in the entertainment sector, new guidance is currently being drafted by HMRC (in consultation with the theatre management bodies and media bodies).

Why is change in the air?

The recent growth of virtual businesses such as Uber and Deliveroo, has highlighted discrepancies in the treatment of those who work for them. These companies claim to be virtual hubs providing work for individual businesses, not employers or contractors of workers. It is not just the new internet platform-based businesses that work in this way though, recent cases have also involved long-established companies including taxi firm, Addison Lee and Pimlico Plumbers. The rapid emergence of the online business model, however, and the loss of many conventional employment opportunities, has brought the issue to prominence – and to the courts and tribunals. To date most cases have concluded that the correct status for people working in this way is “Worker” not “Self-Employed”. Reasons for these decisions have included a requirement for personal service with no substitution possible and being provided with and having to use a company branded van/company uniform. In many cases complex contracts have been drawn up to back up the claim that the working status was Self-Employment, however, the Supreme Court has ruled that the key factor in such cases is the reality of the working relationship not the wording of the contract. This was reiterated in a very recent judgement, involving the courier company Hermes, which said –
“a significant proportion of the employment contract was devoted to terms plainly designed with the purpose to ensure that the couriers do not satisfy the requirements of Worker status…….The terms of the written agreement as a whole and the circumstances in which it is signed were both consistent with the written agreement not being a true or full reflection of the legal obligations….. The question is whether the courier undertakes personally to perform that work and the EJ had no doubt that under the terms of the contract the couriers are obliged personally to do that work. The EJ also ruled that the terms of the contract and the way in which the parties operate in practice point overwhelmingly to the fact that these are contracts that fall within the field of dependent work relationships……. Hermes is not a client of a business undertaking of theirs.”

Re-examining and redefining “Worker” status also formed a key part of the government commissioned report Good Work: The Taylor Review of Modern Working Practices . Its conclusions focussed on the goal of “good work” including worker-status and ways to make work in the “gig” economy “good work”. Its conclusion was that platform-based working offered opportunities for genuine flexibility and for those who might not be able to work in more conventional ways, which should be protected while ensuring fairness for those who work through these platforms. It should be clearer how to distinguish Workers from those who are legitimately Self-Employed.