Life after Pimlico Plumbers – the difference between employees, workers and self-employed
It has been hard to miss the recent Court of Appeal decision in a case brought by a plumber, Gary Smith against Pimlico Plumbers. Mr Smith won his claim to be recognised as a worker and is the latest in a series of cases brought by freelance and self-employed workers, the majority of which have been successful.
The case has again highlighted the confusion over the categories of employee, worker and genuinely self-employed. The significance of these categories is that employees with over two years’ service are entitled to all employment rights including unfair dismissal, maternity and redundancy rights. ‘Workers’ have reduced rights including holiday pay, minimum wage and the ability to bring discrimination claims. The genuinely self-employed have no employment rights at all although they have protection for health and safety and, in some cases, discrimination.
In this case, according to the reports, Mr Smith was VAT registered and paying tax on a self-employed basis, but had worked solely for Pimlico Plumbers for six years. He wanted to cut his 5 day working week to 3 after suffering a heart attack. Pimlico refused and took away his branded van, which he had hired. Mr Smith claimed he was dismissed. Last week the Court of Appeal agreed that he was entitled to workers’ rights even though he was technically self-employed.
Whether a person is classed as an employee, worker or self-employed depends upon the contractual relationship with the employer. As a rough guide:
- Employee: A person employed under a contract of employment who carries out the work personally. In order for a contract of employment to exist certain conditions need to be met, including mutuality of obligation (the employer has to provide work for the employee and the employee agrees to do that work in return for an agreed salary) and control (the employer determines when, where and how the work is to be done). An employer will also pay tax and National Insurance on the employee’s behalf.
- Worker: An individual who has entered into works under a contract, whether express (oral or written) or implied whereby the individual undertakes to perform personally any work or services for another party provided they are not a customer or client of the individual’s profession or business. The definition is more likely to apply to individuals who carry out the work on a casual or freelance basis.
- Genuinely self-employed : Individuals who are genuinely free to decide when to work, can substitute themselves with a replacement and pay their own tax and National Insurance.
This situation is not always particularly clear-cut and the difficulty arises when there is an overlap between the categories. In Mr Smith’s case, he was paying his own tax and providing his own materials in accordance with self-employed status, but was not free to decide when to work and was working exclusively for one company, in accordance with worker/employee status.
This case and others like it are on the increase as those working for “gig” economy businesses are becoming more aware of the fact they may be entitled to greater rights than they were initially led to believe. Businesses should take note of the fact it will not be possible to exercise the degree of control over self-employed workers that employment contracts provide for without those workers being entitled to certain rights that the genuinely self-employed are not afforded. It is therefore important to ensure that any contracts or service agreements are carefully drafted to ensure this confusion does not arise.