What’s the big deal about worker status?
Why should the construction industry care about worker status? The basic issue is that an employee has more rights than a worker, who has more rights than an independent contractor. It is therefore very important to distinguish which of these categories each member of your workforce falls into.
Who is who?
It’s not as simple as what’s stated in a contract. Courts and tribunals look at the reality of a situation to determine worker status, rather than the label given in the contract. There are a series of legal tests to assess an individual’s status. None of these are particularly user friendly and the Government is considering writing new simpler laws.
The best indicators at the moment are:
They might be an independent contractor if they:
- Work for other people and dictate their own work pattern;
- Can (and sometimes do) send someone else to do the work instead of them;
- Provide their own equipment; and
- Are paid for completing a task, not by the hour.
They are more likely to be a worker if they:
- Have to carry out the work themselves, and cannot send a substitute;
- Can turn down work that is offered, with no adverse consequences;
- Use company equipment rather than providing their own.
They are probably an employee if:
- There is mutual obligation – employer must offer work and employee has to do it;
- There is a high degree of control by the employer of what the individual does and where, when and how they do it.
Issues of being a Worker, not self-employed
The big issue here is 28 days of paid holiday, which a worker is entitled to but a self-employed contractor is not.
For example, recent cases have confirmed that:
- a commission-only salesman working for a joinery company, was a Worker, and entitled to holiday pay for his entire time at the company.
- a plumber was a worker, even though he was registered for VAT purposes, filed his accounts as a self-employed person, was in business on his own account and understood when he began employment that he was a self-employed contractor.
Issues of being deemed an Employee, not worker/contractor
The issue frequently arises where redundancies are required in a particular team containing a number of employees and a number of ‘contractors’. The team manager decides to take the ‘easy’ option of terminating the contracts of one or more contractors. However, on closer analysis, the particular contractor(s) have in reality worked exclusively for the company for a number of years and are treated in very much the same way as the employees in the team.
In those circumstances, there is a strong likelihood that the ‘contractor’ is, in fact, an employee. This means that (in addition to holiday pay issues) the individual has a right to a redundancy payment, and the right not to be unfairly dismissed.
Simply terminating the contract without following a fair dismissal process could leave the employer facing a tribunal claim and potential compensation for the employee of up to 12 months’ pay.
Construction companies need to have a good understanding of the true status of their workforce, or at least where your risk areas lie. This knowledge will let you budget properly for holiday, and take appropriate procedural steps when considering redundancies or other dismissals.Back to Our Thinking →