Companies should review staffing structures after confusion over self-employment status

Companies should urgently review the status of freelance workers following the Budget and recent court cases involving the “gig economy.”

The 8 March Budget saw Chancellor Philip Hammond controversially increase National Insurance contributions for self-employed people, while recent high profile court rulings, involving businesses such as Uber and Pimlico Plumbers, have highlighted cases where people are classed as self-employed when they may have employment rights as workers.

Now couriers carrying emergency blood supplies have kicked off two new challenges to the gig economy, claiming that they are employees of the Doctors Laboratory, a company which provides pathology services to the NHS, and not independent contractors.

Such conflicting messages can cause confusion both for businesses and individuals. On the one hand, more people are becoming self-employed, and there is a lot of encouragement for people to go it alone and start a micro-business, but the Budget could be read as discouraging self-employment.

Meanwhile the explosive growth of the gig economy has seen a small army of people increasingly working for themselves as tradesmen and delivery drivers across a spectrum of different industries.

Pimlico Plumbers lost a court case recently when Gary Smith, who was self-employed for tax purposes, took the well-known London business to court, claiming he should be paid holiday pay.

Smith was VAT-registered, and paying tax on a self-employed basis, but worked solely for Pimlico Plumbers for six years. After he suffered a heart attack in 2010, Smith wanted to cut the five-day week, which he had been signed up to work with the firm, down to three days a week.

However, the firm refused and took away his branded van, which he had hired. He claims he was dismissed.

Smith’s lawyers stated that their client was instructed by Pimlico Plumbers in areas such as the minimum number of hours he could work and had to wear a uniform and drive a Pimlico Plumbers branded van, and, therefore, had employment rights.

The court ruled Smith had “worker status” which entitled him to holiday pay but he did not have the right to claim unfair dismissal.

Under UK law, we have three categories to consider: employees, workers and the self-employed.  When companies have self-employed people to work at the business for long periods of time, in many cases it is advisable to take away the risk and the doubt and to employ people in this position.

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Karen Coleman

Specialist in Employment

E: [email protected]
T: +44 (0)845 257 9449