When considering new members of the team early on in business, try to keep your arrangements with them flexible. Flexible work arrangements with “self employed” staff ensure that you are not paying them for not turning up to work. It also means that you are not tied into a long term arrangement with people you do not yet know.
Workers sometimes prefer being set up as consultants or independent contractors so that they have more control over their work and schedules. By contrast, employees normally have less control over what they do and how they do it, but will benefit from legal protections that are not available to independent contractors. These include an employee’s right bringing a claim of unfair dismissal against their employer. Employees and independent contractors are also treated differently for tax purposes. It is therefore essential that contractors and business owners understand the distinctions so that their legal rights and obligations are clear.
When deciding whether someone is an employee, a tribunal will look for three primary requirements: Control, Mutuality of Obligation and Personal Service. If any of these are missing, the contract will not be an employment contract. If all are present, all other factors will need to be assessed to conclusively determine whether the facts are consistent with an employment contract.
Make sure that your contracts formalise the working relationship and are clear on their terms, regarding roles, hours, performance targets.
If you take on staff as employees, try to ensure that you are aware of your legal obligations to them. These include statutory allowances, such as sick pay, maternity leave, payroll, holiday allowances and dismissal procedures.
Jonathan Abrams is a Commercial Lawyer at Gregory Abrams Davidson LLP. You can contact him at firstname.lastname@example.org or +44 (0)20 7979 2066.