‘Self-employed’ individuals may benefit from the best of both worlds by choosing the advantageous tax position whilst benefitting from workers’ rights.
Despite being registered for VAT and paying self-employed tax, the Supreme Court has today upheld the Court of Appeal’s decision in the long-running case of Plimlico Plumbers that Mr Smith is a worker and entitled to worker rights. These worker rights include the right to holiday pay and the right to receive pay in accordance with the National Minimum Wage.
Between 2005 and 2011, Mr Smith worked solely for Pimlico Plumbers. Pimlico Plumbers required Mr Smith to be available to take work for a minimum of 40 hours per week. Mr Smith was required to wear a Pimlico Plumbers uniform and was required to hire a Pimlico Plumbers branded van. As with many self-employed arrangements, Mr Smith provided his own tools and equipment. If Mr Smith wanted to take any time off, he had to arrange this in advance with Pimlico Plumbers giving the company an element of control. Mr Smith’s written arrangement with Pimlico Plumbers did not include a right of substitution and he was required to provide his services personally.
Although determined on the specific facts of the case, today’s decision could have huge ramifications for companies utilising self-employed individuals (who are registered for VAT and pay self-employed tax), as they may now be able to satisfy the worker threshold. Although not on the payroll, ‘’self-employed’ individuals can have their cake and eat it by benefitting from ‘self-employed’ tax treatment but companies risk them subsequently seeking to enforce worker rights against them.
Companies should now consider the structure of their workforce and how ‘self-employed’ individuals are treated in practice in order to assess and mitigate any risks of these individuals having worker status and rights. Companies may wish to consider the level of control exerted over the individual, the working arrangement, whether they personally provide the services and any restrictions placed upon them.
For more information about the case, click here.
