On 14 February 2016, the founder of the Cambridge Satchel Company, Julie Deane OBE, published her review of self-employment in the UK, which looks at the challenges and opportunities for those wanting to work for themselves. The report estimates that 15% of the UK workforce is currently working on a self-employed basis. However, with the lack of definition as to what precisely self-employment is, it can be a costly mistake to make.
A definition for self-employed
One of the report’s main recommendations is that there should be a single definition of ‘self-employed’ for tax and employment law purposes. Personally I would wholeheartedly welcome such a definition, but creating one is by no means a simple task.
In the past, I have come across clients who insist that their staff member is self-employed, because they are responsible for paying their own Tax and National Insurance contributions. Their accountant has told them that they are self-employed, and so that is the end of it. However, sometimes it isn’t that simple.
The fact that HMRC has determined that an individual is self-employed for tax and social security purposes does not necessarily mean that an employment tribunal would not treat them as an employee for employment rights purposes.
Even if not found to be an employee, the tribunal might find that they are a ‘worker’. A worker has more rights than a self-employed individual, but fewer than an employee. They are entitled to the National Minimum Wage and holiday pay, for example.