Employees and Freelancers
Increasingly in the information age, companies need to maintain flexibility and keep costs down. Retaining a small core staff of employees, and using self employed contractors and freelancers to scale up as extra resources are needed is a common way to keep overheads down.
Whether a member of staff is an employee or self employed has an important impact on the IP position of the business.
From a tax perspective, if the true nature of the relationship is one of employment, it will still be regarded as an employment arrangement in the eyes of the law, even though the contract might say a person is self-employed. The question whether or not a person is self-employed stands to be decided under the general law. Historically the test is whether the employer controls or has the right to control the job the employee does, and the way it was done. However, nowadays the control test has become outdated.
Instead the courts consider the extent to which workers are an ‘integral part of the business' as opposed to being merely an accessory to it. Increasingly they consider a variety of factors, with ‘control' being merely one of the elements. The factors now involve assessing the extent to which an entrepreneurial element is involved in the relationship, as well as questions such as:
• Does the contractor work for others too?
• Who controls how the work is done?
• Is the contractor free to choose when he works, or are the hours fixed by the client?
• Does the contractor work on the client's premises, using the client's equipment?
• Is self employment normal for this kind of work?
• To what extent is the contractor at risk as a self-employed person?
Also relevant will be the risk of loss and chance of profit, the provision of equipment, tax and NI contributions, as well as the intention of the parties.
What next?
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