Menu visibility control

Video

Events

Startup Surgery

Most Recent

News

Iris Capital launches €250m European tech investment fund

News

Startup Weekly: Welsh tech accelerator calls for applications, Virgin StartUp partners with WeWork and more

Tech City Voices

Culture. There’s no app for that, Kalanick

Press Releases

‘Connected finance’ app Curve hits £50m spend ahead of UK launch
“Coffee, networking and productivity”: Workspace disruptor ‘Lounge’ launches in London
Kompli-Global’s Technology Will Make Life Harder for Money Launderers

Doctor, doctor, I’ve read about Uber’s employment case and I use contractors for my tech business, should I be worried?

Uber employment

Dear Doctor, I’ve read about the employment cases with Uber and Pimlico Plumbers. I use lots of contractors for my tech business. Do I need to be worried?

Michael O'Brien says...

twitterlinkedinFacebookgoogle_plustwitterlinkedinFacebookgoogle_plus

These recent employment cases involving Uber and Pimlico Plumbers have highlighted the shift in working practices across the UK. While Philip Hammond has promised to find an efficient way to tax workers in this ever-changing economy, now is the time to review how you engage the services of your contractors and ask yourself the following questions:

  • Can your contractors send someone else to do their work?
  • Can they work when, where and how they like?
  • Are you under no obligation to provide them with work?
  • Do they provide their own equipment and cover their own running costs?

If you can answer yes to some of these questions, they may well be self-employed and your business should have no issues. Otherwise you may need to be worried.

In the recent employment cases with Uber and Pimlico Plumbers, the contractors were classed as workers. Under the contract between an individual and a business, an individual is a worker if they are required to perform the work personally and have to undertake most (but not necessarily all) of the work that the business is obliged to offer them. A worker does have very limited rights to send someone else to do their work in certain circumstances, however.

Culture. There’s no app for that, Kalanick

Costly implications

If the contractors are classed as workers, it can have costly implications on businesses. While Uber and Pimlico were not tax cases, there is overlap on the issues. As well as significant tax and national insurance implications, workers have certain entitlements that self-employed contractors do not, for example the National Minimum Wage, statutory minimum level of holiday pay and minimum length of rest breaks.

While an individual may have a different employment status under employment and tax law, all employees are workers. Employees, however, have additional responsibilities to workers, which include:

  • The obligation to undertake all of the work that is provided to them
  • Have to perform all the work personally – providing a substitute is not an option
  • The requirement to do a minimum number of hours work – at a location specified by the employer

As a result, employees enjoy various additional entitlements including statutory redundancy pay, minimum notice periods and protection against unfair dismissal.

If contractors provide their services through their own company, this still can cause issues, although in the main not for the business owner. HMRC has rules known as ‘IR35’ that contractors must follow if they provide their services through an intermediary ie limited company, a service or personal service company or a partnership. Although the responsibility falls on the contractor and their intermediary, businesses may still be caught up in an HMRC enquiry into their contractor’s business methods.

This is a complex yet important area, therefore to safeguard your business you should check the status of your contractors as soon as possible. There are many factors to consider and professional and/or legal advice may be necessary. The cost implications and associated penalties for not taking the necessary steps to protect you and your business could be significant.

Enter your email address to receive updates straight to your inbox

* indicates required
Send me news on...
twitterlinkedinFacebookgoogle_plustwitterlinkedinFacebookgoogle_plus

Editor's picks

Paris

Iris Capital launches €250m European tech investment fund
posted 3 hours ago

Startup Weekly: Welsh tech accelerator calls for applications, Virgin StartUp partners with WeWork and more
posted 6 hours ago

Culture. There’s no app for that, Kalanick
posted 8 hours ago

startup life

Uber’s CEO resigns, over £368m in UK tech funding, a new $3.3bn fund and more in The Week in Tech
posted 11 hours ago

inploi-co-founders

EXCLUSIVE: London-based Inploi raises £500,000, brings total to £1m
posted on June 22, 2017

Peter-Smith-Nic-Cary-Feb-2016

UK-founded tech startup Blockchain secures $40m Series B
posted on June 22, 2017