This seemingly simple question is, in fact, not so simple to answer. Mainly, it has to be said, because you need to read the HMRC website to work out the answer.
The source of this week’s blog came from a friend of mine whom we shall call Bill.
Bill works for an organisation which is making staff redundant. Not such an unusual thing in this day and age, and not particularly surprising nor worrying for Bill who’s been there, seen it, done it, got the T-shirt, sold it and bought a new one.
Except, this time his employer is trying to say that Bill is Self Employed and therefore isn’t part of the redundancy programme and is simply going to have his contract terminated.
Consternation all round.
This may have been the case many years ago when Bill first started working for the organisation, but things have changed.
So, Bill took on the mighty task of reading the HMRC website and trying to make sense of the rules.
I thought I’d do the same so I could say to him: it’s easy, you definitely are/aren’t employed.
I’m sorry to say I failed dismally, so I thought I’d report to EB what I found.
After working out the correct search terms so I could use the intuitive search tool I found a whole raft of information, including an interactive tool called the Employment Status Indicator (ESI).
I followed the links and: Internet Explorer cannot display this page.
I decided to wade through the prose and found this statement:
A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.
Now we’re getting somewhere. I continued reading and no more than three links and four pages later came across a series of questions to ask to determine whether someone was employed. Here they are:
As a general guide as to whether a worker is an employee or self-employed; if the answer is ‘Yes’ to all of the following questions, then the worker is probably an employee:
- Do they have to do the work themselves?
- Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
- Can they work a set amount of hours?
- Can someone move them from task to task?
- Are they paid by the hour, week, or month?
- Can they get overtime pay or bonus payment?
Good, isn’t it?
Next there are a series of questions to work out whether a person is self employed:
If the answer is ‘Yes’ to all of the following questions, it will usually mean that the worker is self-employed:
- Can they hire someone to do the work or engage helpers at their own expense?
- Do they risk their own money?
- Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
- Do they agree to do a job for a fixed price regardless of how long the job may take?
- Can they decide what work to do, how and when to do the work and where to provide the services?
- Do they regularly work for a number of different people?
- Do they have to correct unsatisfactory work in their own time and at their own expense?
Flushed with me success I tried the ESI again and this time had some success. I applied the tests and very usefully the response was ‘He’s probably employed’!
I don’t want ‘probably’ I want to know!
I have to say, though, by all tests HMRC suggest, Bill is employed and it’s clear the HR department of his employer doesn’t understand the rules… or perhaps they just don’t understand the HMRC website.
They wouldn’t be alone!