In our first blog in conjunction helping yard owners understanding all aspects of employment for their business, Vicky James from the Equestrian Employers Association (EEA) helps us understand the important topic of differentiating between employment and self employed for your yard staff.
Getting employment status right is so important for many reasons. As a business owner, it means determining your legal obligations and responsibilities, and as an individual, it is determining both your legal rights and your legal obligations.
There are five types of employment status, but for the purposes of this article, will be focusing on the following three:
- Worker
- Employee
- Self-employed and contractor
Workers and employees have certain employment rights as outlined below. Those who are self-employed do not have these rights.
Both workers & employees have:
- The right to be paid the national minimum wage
- Protection from unlawful deductions from wages and unlawful discrimination
- The right to the statutory minimum paid holiday
- The right to the statutory minimum rest breaks and to work no more than 48 hours per week if they choose
- Protection for whistle-blowers
- The right not to be treated less favourably for working part-time
Employees are also entitled to:
- Statutory Sick Pay
- Statutory maternity pay and leave
- Statutory paternity pay and leave
- Statutory adoption pay and leave
- Statutory shared parental pay and leave
- Minimum notice periods if their employment will be ending
- Protection against unfair dismissal
- The right to request flexible working
- Time off for emergencies
- Statutory Redundancy Pay
Workers may also be entitled to:
- Statutory maternity pay
- Statutory paternity pay
- Statutory adoption pay
- Statutory shared parental pay
Failing to give an individual the correct employment status, and therefore not giving access to rights to which they are entitled, can be extremely costly to a business – both financially and reputationally.
There are an increasing number of employers advertising roles as self-employed, which should be an employed role. These adverts will stipulate terms such as full-time/part-time, set days and hours, rate of pay, holiday entitlement, and access to training. This does not abide by employment legislation and is contributing to the issue of false self-employment within the equestrian industry.
An individual who truly has self-employed status should be able to do the following:
- Set up their own business
- Set their own rate of pay and terms
- Set their own days and hours (this can be agreed with the business owner to suit, but it should be flexible)
- Have the ability to turn down work
- Have several clients at the same time
Someone who is self-employed also must take full responsibility for any failings of their business and pay tax to the HMRC.
Where the above points are not being exercised, it may be that self-employed status is not correct and this should be reviewed immediately.
Employment status is important for insurance purposes. An employee or worker will be covered by the insurance held by the employer, whereas an individual who is self-employed will need to ensure that they have the appropriate insurance for the work in which they are undertaking.
Employers must ensure that they have both employer liability and public liability insurance. A self-employed individual must have freelance liability insurance, and personal accident and travel insurance where appropriate.
Failure to hold the correct insurance in any scenario can be very costly to both a business and an individual.
Getting employment status wrong can also have tax implications. IR35 off-payroll working rules put the onus on the business to determine the correct employment status for individuals providing services. Whereas self-employed sole traders themselves are not directly implicated by the rules, it is up to the business to determine the true employment status of someone classing themselves as self-employed.
The risk to employers is that if they pay someone as self-employed and then the HMRC decides they should have been treated as an employee, what can happen is the HMRC assume that any money paid to the individual was their net wages (after-tax) and that the employer has not paid tax and national insurance. Employers are then liable to pay that, potentially for as long as the person has been working for them, plus, penalties for late payment and interest. It is also the case that potentially, they might have to pay them for holiday pay for any holidays they took during that time. In addition, there could be penalties if the individual were eligible to join a pension scheme and they were not enrolled.
Assigning an individual the correct employment status is vital, with long-lasting damage to finances and reputation when this is not done properly. Not only this, but it is an essential component of being a good employer who is operating fairly, and most importantly, within the law.
So, what can getting it wrong look like?
Alsnih v Al Quds Al Arabi Publishing & Advertising 2023
This was an unfair dismissal case where the employer had dismissed the claimant after six years’ service. The tribunal found that the sole reason for dismissal was because the claimant had refused to download the Viber app to their personal mobile phone. No other alternative request for running the app was granted by the employer to enable the claimant to separate work and home life.
During the process, the tribunal identified that the individual was in fact working as an employee and not self-employed as the employer had thought. This resulted in the following:
- £20,000 award for unfair dismissal
- A 25% uplift for failure to follow a fair disciplinary process ahead of dismissal
- £12,000 award for breach of contract, notice pay, and holiday pay
As the tribunal found the claimant to be an employee rather than self-employed, and an employee has the right to a fair disciplinary process ahead of any dismissal, the absence of such a process was the reason why the 25% uplift in the award was given. Tribunals will always look at the process followed by the employer as well as the reason for dismissal itself, so it is vital that employers are clear as to the status of those who work for them, and therefore what procedures need to be followed.
Back-dated holiday pay made up a large portion of the £12,000 award. In this case, the tribunal found that the claimant was an employee for the entirety of their service. They had taken holiday leave during that time but had never been paid for it. The cost of this to the employer was £9,230.
For equestrian specific advice and guidance on getting employment status right, join the Equestrian Employers Association (EEA). The EEA has been created to help employers in the industry to be compliant in all aspects of employment, and therefore, helping to protect their business.
