In order to significantly minimise the risk of HR & Employment disputes, businesses must take the time out to review their staffing structures, individual status and terms and conditions of employment.
The significance of identifying status allows determination of legal rights and obligations; tax and NI responsibility; liability for injury in the workplace and Employer’s Liability Insurance.
Employees have much greater statutory employment rights than workers or self-employed individuals and it is therefore important to ensure that staff in your business have appropriate contractual documentation reflecting the actual day to day relationship and their status in order that your business has appropriate protection.
Determination of employment status is extremely complex. Currently there are four categories into which employment status can fall, these being; an individual, an Employee, a Worker or a Self Employed/Independent Contractor.
The Employment Rights Act 1996 s230 (1) defines an Employee as an individual who has entered into or works under a contract of employment which is defined as a contract of service or of apprenticeship. This has been regarded as an unhelpful definition by the Courts and Tribunals which is why determination of employee status is reliant on case law.
The Judiciary’s approach focuses on the factual analysis of the relationship, analysis of contractual documentation, applying a number of legal tests and looking beyond the label attached to the individual.
The 3 key tests are irreducible minima -personal service, whether there is sufficient control and mutuality of obligation. If one of these tests is not fulfilled, an individual cannot be an employee. These are complex tests and require a thorough understanding prior to applying these to a situation.
Working relationships which may give rise to difficulties include Office holders, Consultants, Part-time and Fixed-term employees, Casuals, Temporary agency workers and Employee shareholders.
Businesses should consider the following in regards to employment status:
1. Consider the commercial needs of the organisation;
2. Identify which status best matches commercial requirements;
3. Ensure the contractual documentation is well drafted and achieves its purpose;
4. Ensure the day to day relationship between the individual organisation reflects the contractual documentation;
5. Regularly review the reality of the relationship and consider the impact in status;
6. Train line managers to receive training on status and how it can change;
7. Keep clear distinction between casuals and employees; and
8. If status does change during the relationship, issue new contractual documentation to reflect this.
If you require a review or advice in relation to your staffing structure, individual status, existing contractual documentation and/or advice and assistance with regards to Employment Status, please contact our employment law solicitors, who would be happy to help.