is your freelancer actually an employee?
All hail the freelancer, the skilled saviour of growing businesses everywhere. Freelancers can slot into your business, bringing skills and experience right where you need them. It’s also cost-effective, let’s be honest, sort their own tax and NI, no holiday pay, no onboarding costs.
Some of the best freelancers can work with the same client for years and become a crucial part of the business but that’s where you could be on a bit of a sticky wicket - and where you may want to consider if they’re actually still a freelancer at all - in the eyes of the law, the answer could be no.
What’s the difference?
UK employment law recognises three main categories of workers:
Employees – Individuals with a contract of employment who have rights such as sick pay, holiday pay, redundancy protection, and unfair dismissal claims.
Workers – Includes some freelancers who are not full employees but still have certain employment rights, such as minimum wage and holiday pay.
Self-employed / Contractors – Freelancers who run their own business and have full control over how and when they work.
Seems pretty clear so far, but it’s not just about what the contract says but rather the dynamics of the actual working relationship, and crucially, these are the bits which can catch you, as an employer out.
Control
Who decides what work is done, when and how?
Employees usually work under the direction of the employer. Freelancers have control and autonomy over how and when they complete their work
If you’re setting the work and setting deadlines for when, where and how it’s done, your freelancer could be considered an employee.
Mutual Obligation
Is there an expectation that work will be provided regularly, and the freelancer must accept it?
Employees have mutual obligations to work and be paid; self-employed individuals can generally decline assignments.
If there is a regular flow of work and the freelancer has to accept it, they’re probably not a freelancer anymore.
Substitution
Can the freelancer have someone else do the work?
A genuine right of substitution is a strong indicator of self-employment.
If you (or the work involved) doesn’t allow for someone to replace the freelancer to complete it, well… there’s a theme here you’ll have noticed. They’re probably not a freelancer.
Finances
Is the freelancer responsible for their own equipment and expenses?
Do you typically reimburse the freelancer for costs incurred?
If you’re covering the cost of equipment and expenses, you’re treating your freelancer like an employee.
Integration
Is your freelancer considered part of your organisation, included in meetings, given a company email address?
Integration into your company structure of this type could be considered employee status.
Contract Vs Reality
Even if a contract states someone is a freelancer, self-employed or a contractor. A tribunal will look at the practical reality of the working relationship.
What happens if you get it wrong?
Misclassification can leave your organisation open to employment claims and Tax and National Insurance liabilities, and it’s pretty messy for your freelancer too.
How To Avoid A Costly Mistake
Review contracts regularly - ensure contracts reflect th reality of the working situation
Document working arrangement, keep clear records of control and responsibilities
Provide clear guidance, and ensure those with hiring responsibilities understand the differences
Seek legal advice - if you are unsure of the status of an existing freelancer or are considering adding freelance support to your business, speak to an expert for more advice (ahem, us - we can help.
Finally, don’t be scared of freelancers.
Freelancers are utterly brilliant and can provide flexibility and expertise which can have an enormous impact on your business. Always keep in mind your responsibilities and regularly re-evaluate the working relationship to make sure you’re within the law.
And a last bit of food for thought, if you are working regularly with a great freelancer who is making a difference to and spending a lot of time within your business, maybe they should be an employee? It might be time to hire - and the answer might just be under your nose!