December 2019 – Employee or Worker? What’s the Difference?
Employment Update for Small Businesses
This is our last newsletter of 2019, so I would like to wish you all a very Merry Christmas and a Happy New Year. 2020 is likely to be a challenging year for employers, with the ongoing uncertainty over Brexit and with a number of proposed employment law changes from most of the political parties ahead of the General Election, so we will do our best to continue to keep you informed and (hopefully) entertained!
Last month we promised to provide you information on the distinction between workers and employees, and what the difference means; so read on to find out more.
Please contact me if you would like to find out a bit more about any of the subjects raised in this update or if you need any help or advice.
Please forward this email to any of your contacts who might find it of benefit.
Last month we told you about some legal changes taking place next year, specifically the need to provide written statements of employment to workers as well as employees. But what is the difference between a worker and an employee? Well, the law states that a worker is someone who provides their service to another under a contract which is not a contract of employment. They must provide their service personally to be considered a worker, and this work must not be provided in a manner consistent with them being a service provider to a client. Confusing isn’t it!
What this means it that you don’t need to worry about the genuine contractors you may bring in to provide services to you as a client, where you need their specific skills (e.g. a plumber who comes in to carry out a discreet service) but if you have people you use regularly to provide their services who aren’t employees, you should assess their status carefully.
As a worker must provide their service personally, this would not normally cover a situation where you contract with an individual to provide a service but where they are permitted to send someone else to carry out some or all of the work.
Also, if there is no obligation on the individual to carry out work when requested or for the “employer” to provide work, then they are not a worker. There must be what is known as mutuality of obligation. So a casual worker may well not meet the definition of a worker. If there is no guarantee of work for them, but you know you can call on them when needed in the hope that they may be available, and if they can readily turn down any offer of work, they will not normally be considered a worker.
Agency temps do not normally have any contract with the principal (i.e. the organisation to whom they provide their services) so they can be neither an employee nor worker of the principal. However, they may be considered a worker due to their contract with the agency through whom their service is provided.
The biggest question mark for many employers will be the status of long-term contractors. Those who provide their service on a self-employed basis. Some factors may indicate their status is actually that of a worker. For instance, where yours is the only company they work for; they have set hours of work; they are quite integrated in the business; third parties would assume they are your employee; or they have to obtain permission to take time off. This is not an exhaustive list so please contact us if you would like any help assessing your contractors.
Whilst we do not advise on tax matters, you may also wish to check the new rules on IR35 that may apply to some of your contractors. Tax law and employment law are distinct, so just because someone is considered an employee or worker in employment law terms, that may not carry over into tax law and vice versa, so you should take advise from your accountant where there is any doubt.
National Minimum and Living Wage Rates
The current National Living Wage and National Minimum Wage rates are:
£8.21 per hour for workers aged 25 and over
£7.70 per hour for workers aged 21 to 24
£6.15 per hour for workers aged 18 to 20
£4.35 per hour for workers aged 16 and 17
£3.90 per hour for apprentices under 19 and those over 19 in their first year*
*N.B. Apprentices over 19 and who have completed at least one year are entitled to the appropriate rate for their age.