Employee vs Subbie - which is right for you?
There has been a lot in the news recently about how you know whether someone is actually an employee. If they aren’t, then what rights do sub-contractors have? We thought we’d make it simple and put together a guide for you to download.
The use of sub-contractors is a way for start-ups and small businesses to get people on board as their business grows. It also helps if you’re nervous about taking on the first few employees. It’s understandable because it is a cost-effective way of getting someone in with the right skills and experience, but without the risk or costs associated with employing someone.
However…recent cases in Tribunal and the High Court mean that you have to be very careful in spelling out in your contracts exactly what is expected of the person who comes to carry out work on your behalf.
An important case to be aware of is that of Pimlico Plumbers. They used a ‘self-employed’ plumber called Gary Smith between 2005 – 2011.
Gary provided his own equipment, was liable for his own work, had his own insurance and paid his own tax and NI. So, by the look of it was a self-employed sub-contractor – right?
Well not exactly!
Pimlico Plumbers expected Gary to work for them 5 days per week (40 hours) so he had no opportunity to carry out work for anyone else. He had to wear the Pimlico Plumbers uniform and rent a branded Pimlico Plumbers van. Gary had to carry out the work personally and if he wasn’t able to, he wasn’t allowed to provide another plumber of his own, he had to effectively swap a shift with another Pimlico Plumber.
The court has found that Gary wasn’t self-employed. But he wasn’t an employee either – his employment status has been classed as a ‘worker’. A better term for this is a ‘Dependent Contractor’. This would be someone who is not fully employed but works on a contracted basis largely for one main client (exactly as Gary did).
So, what’s the difference….?
Someone is likely to be a worker if MOST of these apply:
- they occasionally do work for a specific business;
- the business doesn’t have to offer them work and they don’t have to accept it - they only work when they want to;
- their contract with the business uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’, or something similar;
- they had to agree with the business’s terms and conditions to get work - either verbally or in writing;
- they are under the supervision or control of a manager or director;
- they can’t send someone else to do their work;
- the business deducts tax and National Insurance contributions from their wages; and / or
- the business provides materials, tools, or equipment they need to do the work.
Now that you can tell if your “Gary” is an employee, worker, or self-employed contractor, the next part is to work out what they are entitled to.
Why not download our free guide on statutory rights for employees, workers, and self-employed contractors?