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How To Decide if an Individual is Employed or Self-Employed

How To Decide if an Individual is Employed or Self-Employed

Written by Tina Winter

If you’re currently studying for J01, R03 or AF1 exams, pole dancing is probably one of the furthest things from your mind at the moment. However, the case of the aggrieved pole dancer may help you to remember the guidelines as to whether a worker is employed or self-employed.

Nadine Quashie has recently won a landmark legal case against Stringfellows nightclub – the court found in her favour that she was employed by the club rather than self-employed as they contended. The case was brought in support of Ms Quashie’s claim against unfair dismissal, even though she had no contract of employment, but many of the issues that were raised are also relevant to an individual’s tax status.

There are a number of tests which indicate employed or self-employed status – no single test is conclusive but overall they can give a good indication of the correct position. The onus is on the employer to deduct PAYE from payments made where any doubt exists until clearance is obtained from HMRC.

As a general guide as to whether a worker is an employee or self-employed; if the answer is ‘Yes’ to all of the following questions, then the worker is probably an employee:

  • Do they have to do the work themselves?
  • Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
  • Can they work a set amount of hours?
  • Can someone move them from task to task?
  • Are they paid by the hour, week, or month?
  • Can they get overtime pay or bonus payment?

In Ms Quashie’s case she was obliged to perform where and when she was told, and even what to wear (or not wear) when she was doing it.

If the answer is ‘Yes’ to all of the following questions, it will usually mean that the worker is self-employed:

  • Can they hire someone to do the work or engage helpers at their own expense?
  • Do they risk their own money?
  • Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
  • Do they agree to do a job for a fixed price regardless of how long the job may take?
  • Can they decide what work to do, how and when to do the work and where to provide the services?
  • Do they regularly work for a number of different people?
  • Do they have to correct unsatisfactory work in their own time and at their own expense?

The key tax case here is Hall v Lorimer. A vision mixer in the film industry was found to be self-employed even though his contract was for labour only, mainly because he worked on a large number of different projects, often only for a day at a time.