Employed or Self-Employed?

Employed or Self-Employed?

The issue with the status of workers within the construction industry is not a new matter and over the last few years HMRC have been making substantial efforts to re-classify as many subcontractors as possible as employees.

The tests that are applied include:

  • the right of control over how, what, where and when the work is done; the more control that a contractor can exercise, the more likely it is that the worker is an employee.
  • whether the worker provides a personal service or whether a substitute could be provided to do that work.
  • whether any equipment is necessary to do the job, and if so, who provides it.
  • the basis of payment - whether an hourly/weekly rate is paid, whether there is any overtime, sick or holiday pay and whether or not invoices are raised for the work done.
  • whether the worker is part and parcel of the organisation or whether they are conducting a task that is self-contained in its own right.
  • what the intention of the parties are - whether any written statement exists where there is no intention of an employment relationship.
  • whether there is a mutuality of obligation; that is, an ongoing understanding that the contractor will offer work and the worker accept it.
  • whether the workers have any financial risk..

Clearly, HMRC would like subcontractors to be classed as employees, as this generally means that more tax and National Insurance is due. However, just because HMRC think that somebody should be re-classified thid does not necessarily mean that they are correct.