3rd December 2024

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Employee or contractor

Some councils may have "an arrangement" with a handyman or gardener, who works on a weekly basis for the council, and submits an invoice at the end of the month.

The council may have considered this person to be a self-employed contractor, but the technical truth can often be that they are an employee. This normally comes to light either when the council wants to terminate the arrangement, or the employee wants holiday pay, or HMRC get involved.

The tests used to address whether or not someone is an employee are:

a) Does the council control what the employer/worker does? If you consider the nature of what an electrician or plumber would do if you wanted some work doing, they would be left to their own devices. Consider this in terms of how the council's contractor works. Does the council give clear instructions as to what work it wants doing and how to do it, and supervises the outcome? If so, they key question of control appears to show that they would be an Employee.

b) Financial Investment. The plumber or electrician would bring their own tools and equipment. If the council's contractor uses their own equipment, that would make them a contractor. However, if they use the councils tools and equipment, there is no financial investment by the worker and they are in all likelihood an employee.

c) Mutuality of Obligation. Again, you don't care who the plumber or electrician is, as long as they get the job done. Does the council expect this same person to turn up on a regular/weekly basis and do the job? If so they are treating them as an employee.

If the above tests demonstrate that the person is engaged by the council as an employee, they will qualify for the National Minimum Wage rate of pay, and also accrue holiday entitlement during their tenure at the council. Furthermore, they could claim Unfair Dismissal if the Council tried to terminate the contract, or Constructive Dismissal due to the loss of basic statutory rights such as holiday pay.

Thanks to Chris Moses, Personnel Advice and Solutions for the text here

What about the clerk?

Guidance from HMRC is that "A Parish Clerk can never be considered self-employed for tax or NIC purposes."

The clerk must always have the status of employee, never a contractor or self-employed.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim67300

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm4260

Last updated: Mon, 25 Nov 2024 14:08