It is becoming more common for companies to use self-employed workers to fill staffing gaps and provide flexible employment resources, particularly where such individuals are required to cover a variety of shift patterns. However, firms can face serious consequences if they fail to understand the full extent of their obligations.
Earlier this week it was revealed that courier company Hermes is facing a possible HMRC investigation over allegations that it has failed to pay workers the National Living Wage. There have also been reports of a worker so afraid of having their work withdrawn while sick they worked with a bucket in their car, and two parents being threatened with loss of work while sat at their dying child's bedside.
The government does not plan to launch its own investigation into Hermes' working practices following the above instances being uncovered by a report by MP Frank Field. So the jury's out on what will happen now regarding these allegations of "serious bullying". But business minister Margot James has requested HMRC look into the matter of pay at the firm.
If these allegations over pay are upheld it is possible that the firm has incorrectly identified contractors as self-employed when the amount and nature of the work they are doing on a regular basis means they should be treated as direct employees.
It’s not particularly surprising that a firm as large and high-profile as Hermes could come under fire for this. While there’s lots of guidance available for businesses to understand the legalities of employing self-employed individuals, it can be a confusing area.
Regardless, having a solid approach to employment and the minimum wage is crucial for all companies. Failing to comply with such regulations can not only result in penalties – it can affect brand reputation hugely.
One of the most important things for employers to understand in relation to the use of self-employed individuals is that their status could alter over time. For example, the employer may choose to give work to a particular individual repeatedly because they are reliable. However, this can cause the nature of the relationship between the employer and the individual to evolve into something more akin to direct employment, and this can have significant implications in terms of their rights to pay and employment protection.
While this issue can affect businesses of all sizes, smaller businesses are more likely to overlook the fact that their relationship with individuals could shift over time, largely due to a lack of resources. They need to be aware that there could be serious consequences for getting this wrong.
When questioning the true nature of an employer/employee relationship a tribunal would consider the ‘mutuality of obligation’ that exists between them, i.e. whether there is an obligation on the employer to provide work and an obligation on the individual to accept it.
To avoid risks associated with the use of self-employed individuals, all employers need to check that they are keeping robust up-to-date records that detail information such as regularity of work patterns.
Employers need to be open and honest about the relationship they want to establish with each individual worker from the outset, and make sure the correct agreement is struck at the start and maintained appropriately.
It’s crucial that companies take matters into their own hands and manage the potential risks. This includes a regular review of the working relationship, a recognition that it may have evolved over the passage of time, and acting upon that change to ensure that the correct documentation and processes are in place to account for it.
Aye Limbin Glassey is a partner at Shakespeare Martineau
