A person is self-employed if they run their business for themselves and take complete responsibility for its success or failure. Alternatively, they might provide their services as part of a business undertaking carried on by someone else.
Self-employed people do not have the employment rights and responsibilities of employees as they are their own independent contractor. This negates the necessity for a contract of employment between two separate parties (employee and employer) and means that a self-employed person must decide for themselves things like how much to charge and what services they are to perform.
Being self-employed, therefore, means forfeiting the right to:
- statutory sick pay
- maternity, adoption and paternity leave and pay
- not be unfairly dismissed
- statutory redundancy pay
- the National Minimum Wage
- rest breaks, paid holiday and limits on night work
- protection against unauthorised deductions from pay
What are the employment rights for a self-employed worker?
As a self-employed worker in the UK, it's important to understand your rights and protections under the law. James Watkins, a Senior Associate and Employment lawyer at Howells Solicitors, has written this overview to help you navigate some of the key issues:
Employment Status: Self-employed persons are those who undertake to carry out work who are neither an ‘employee’ nor a ‘worker’. This means the self-employed not have the same employment rights as employees and workers, such as the right to the National Living Wage, statutory sick pay, or paid holidays. However, you do have the right to negotiate your own terms and conditions of work.
Contracts: It's important to have a written contract in place that sets out the terms and conditions of your work. This should include details such as payment rates, working hours, the place where the work is carried out, and any specific responsibilities or obligations.
Health and Safety: As a self-employed person, you are responsible for your own health and safety while working. This means you need to take reasonable steps to ensure that your working environment is safe and that you are not putting yourself or others at risk.
Discrimination: Discrimination on the basis of age, race, gender, religion, sexual orientation, or disability is illegal in the UK. As a self-employed worker, you are protected by these laws just like any other worker, provided you carry out the work personally: in other words, provided you are not permitted to sub-contract the work out or employ staff to do to the work.
Tax and National Insurance: Self-employment for tax purposes can be different to self-employment for the purposes of accessing employment rights. There is no single test; it is based on several factors. Where you are self-employed for tax purposes, you will be responsible for paying your own taxes and National Insurance contributions. You will need to register as self-employed with HM Revenue and Customs (HMRC) and file a self-assessment tax return each year.
Intellectual Property: If you create original work as part of your self-employment, such as writing, artwork, or software, you may have intellectual property rights. It's important to understand these rights and how to protect them, so you should seek advice from a specialist if required.
Dispute Resolution: If you have a dispute with a client or customer, you may need to use alternative dispute resolution (ADR) methods such as mediation or arbitration to resolve the issue. If this is not possible, you may need to take legal action – most likely through the County Court or High Court as opposed to the Employment Tribunal.
Remember, while being self-employed can offer many benefits such as flexibility and autonomy, it's important to understand your legal rights and responsibilities to ensure that you are protected and can operate your business effectively.
Protection against Unfair Contract Terms: As a self-employed worker, you have some protection against unfair contract terms in business-to-business contracts under the Unfair Contract Terms Act 1977 or the Consumer Rights Act 2015. These Acts allow for arguments that certain clauses in a contract that are considered unfair or unreasonable may be unenforceable.
Right to Work: As a self-employed worker, you have the right to work for yourself and provide services to others. However, it's important to ensure that you have the right to work in the UK and are complying with any visa or immigration requirements if applicable.
Data Protection: If you handle personal data as part of your self-employment, you will need to comply with data protection laws. This includes ensuring that any personal data you hold is kept secure and only used for legitimate purposes.
Insurance: As a self-employed worker, you will most likely need to take out insurance to protect yourself and your business. This could include public liability insurance, professional indemnity insurance, or business interruption insurance.
Retirement Savings: As a self-employed worker, you will not have access to an employer pension scheme. However, it's important to plan for your retirement and consider setting up a personal pension or other savings plan.
Statutory Holiday and Sick Pay: As a self-employed worker in the UK, you are not entitled to statutory holiday pay or sick pay. This is because these benefits are only available to employees and workers under UK law.
However, it's worth noting that some may be entitled to these benefits (and other rights) if they ought properly to be classified as workers or employees, rather than being self-employed, which may have been their perception. This can be a complex issue, and it's advisable to seek legal advice if you are unsure about your employment status and entitlement to rights and benefits.
If you are not entitled to statutory holiday pay or sick pay, it's important to factor these costs into your business planning and budgeting. You may want to consider taking time off during quieter periods to avoid losing income during busier periods, and it's also important to have contingency plans in place to cover any unexpected periods of illness or incapacity.
Some self-employed workers may choose to take out insurance or other forms of protection to cover the costs of time off work due to illness or injury. However, it's important to research your options carefully and ensure that any insurance policies or other protections you take out are appropriate for your individual circumstances.
Determining Between ‘Self-Employed’ and ‘Employee’ or ‘Worker’
There is no one factor that completely determines an individual’s employment status and it can be disputed. The emergence of the ‘gig economy’ has led to a surge in cases recently where the courts have been required to decide this issue.
Disputes usually arise when there is confusion surrounding the relationship between an individual and the person or business for whom they are undertaking work. An example of this is an individual being denied holiday pay by an employer because they say that the individual is self-employed.
Often disputes can be resolved between the parties themselves. A well-draft contract of employment, or contract for services, will usually provide confirmation or at least some indication of the parties’ intentions.
Employees and workers have the right to lodge a grievance under the company’s Grievance Procedure as a more formal way to try to resolve any issues. But even a person who might be considered self-employed can write to the person with whom they have contracted to try to clarify their status.
If you are an individual seeking to assert ‘employee’ or ‘worker’ status for the purpose of accessing certain rights, you may need to take contact Acas to start a process known as ‘Early Conciliation’ prior to lodging an Employment Tribunal claim. You should not wait too long because the deadlines to start this process are often just three months less one day from the date of the act giving rise to your issue.
If early conciliation fails, then your last resort is to submit a claim to the Employment Tribunal. The Employment Tribunal has the power to examine the evidence of your working relationship and determine what category you fall into.
Your written contract (if there is one) is a good source of information and highly influential, but it is not necessarily the end of the story. An Employment Tribunal would examine the practical reality of the working arrangements too. This would include exploring key aspects such as:
- Mutuality of obligation: Whether the business is required to offer you work, and if so, whether you are obliged to accept it.
- Control: whether the position is one of subordination and dependence, where one person has the control over the other person’s work.
- Personal service and substitution rights: Whether the individual is required to perform the work personally, or whether they could in theory send a substitute in their place.
- The complete picture of the working relationship: This would include aspects such as,
- who pays the tax
- who is liable for insurance
- who bears the legal and financial risks involved
- who provides and maintains the equipment or any uniform
- whether the person is subject to the company rules and policies
- whether performance or misconduct is managed by another person
- whether the person is fully integrated into the employed workforce;
- how the relationship can be terminated.
There is no one defining feature which determines the correct category of employment status. It must be looked at as a whole and often there are differing versions of what the working arrangements really are.
If you need legal advice on your employment status and rights, then contact us here, send us an email to firstname.lastname@example.org or give our friendly employment experts a call on 029 2043 7484.
Employment Rights for the Self-Employed
Being genuinely self-employed does not mean forfeiting all rights in the workplace.
Those who are self-employed will still have protection in place for their health and safety, as well as protection against discrimination where they perform the work personally. They may also have specific rights and responsibilities set out by the terms of any contracts that they have with their clients.
Health and Safety
It is a duty under the Health and Safety at Work etc. Act 1974 for self-employed people to assess health and safety risks to themselves and others they work with. This is to protect them and others from workplace dangers.
In order to do this, they must understand what in their day-to-day business practice might cause harm and try to prevent this harm occurring by putting into place appropriate and sensible control measures.
For more information on how to ensure that your business complies with health and safety law, please see this guide published by the Health and Safety Executive.
Contracts with Clients
Some self-employed people sign contracts with their clients, and these will contain details of rights and responsibilities. It is unlikely that this contract will focus on employment rights and will usually focus on the specific work expected of them.
Other Rights for the Self-Employed
Whilst a self-employed person will not be able to benefit from the full set of rights enjoyed by employees, or those rights enjoyed by workers, they will still have access to things like a state pension, welfare benefits, and an employment and support allowance from the Department of Work and Pensions (DWP) if they fall ill.
Self-employed people have a right to a state pension if they have paid the necessary national insurance contributions.
Self-employed people on low incomes have the right to receive tax credits and certain welfare benefits. Making this type of claim can be complex and usually requires the help of HMRC, the DWP or the Citizens Advice Bureau.
Self-employed pregnant women might be entitled to Maternity Allowance (MA) if they have been self-employed for at least 26 weeks out of the 66 weeks up to and including the week before the week their baby is due. They must also earn at least £30 a week.
Whilst the self-employed can’t receive statutory sick pay when they fall ill, they may be able to claim Employment and Support Allowance (ESA) from the DWP if they have paid enough National Insurance contributions.
The ‘new style’ ESA provides financial support and personalised help to return to work if possible. It will typically involve a Work Capability Assessment to see to what extent the illness affects the person’s ability to work.
Protection for Self-Employed Persons
Those who are self-employed should consider what will happen should they become unable to work due to sickness or injury.
Personal insurance such as income protection can replace part of a self-employed person’s income if they can’t work because they are ill or disabled, whereas critical illness cover may pay out if a self-employed person is diagnosed with a specific medical condition or injury listed on the policy.
Talk to Experienced Employment Solicitors
If you are an employer seeking to clarify your workers’ employment status, or to offer a new contract for services or employment contract, please get in touch for a quote.
If you are an individual whose employment status is in dispute, then please get in touch, particularly if you are also being treated unfairly. Here at Howells we have the knowledge, skills and experience to fight your corner. Our empathetic and experienced team can help you understand your rights and obligations. Call us on 02920 404020 or email us at email@example.com to get in touch today.