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Are your workers genuinely self employed? Legal Risks Beyond HMRC Concerns
18 January 2024
Payroll, People
We have written in the past about employment status in the construction industry and explored the question of whether a subcontractor is genuinely self-employed or an employee?
See our blog post Construction Industry self employed workers? where we examine the Pimlico case.
Employment Tribunal Case
Well here is another cautionary tale which needs to be examined:
Mr Lee Richards Appellant – v – 1) Waterfield Homes Ltd 2) Unity Build & Repairs Ltd
The Case
Mr Richards was engaged as a skilled carpenter from 2010 to 2018 under the construction industry scheme – i.e. he was treated as self employed for tax purposes.
However he worked set hours, had no other customers and to a large extent was controlled by the contractor he was engaged by.
In those respects he resembled an employee rather than a sub-contractor.
Company Review
In 2018 the company for whom Mr Richards worked carried out a status review and decided he indeed needed to be treated as an employee and that his employment commenced in 2018.
Mr Richards then became ill and finally resigned.
Employment Tribunal
He appealed to an employment tribunal to argue that his employment started in 2010 and not 2018.
He won the case.
The Ruling
The ruling stated (referring to the employment judge) “there is only one conclusion which he could legitimately have reached by reference to long-established authority …….. that the Claimant was an employee throughout the time in question”.
The benefits for Mr Richards was that as an employee he was entitled to National Minimum Wage, Holiday and Sick Pay as well as contributions to a pension scheme from 2010.
The Moral of the story
The moral of the story is that it isn’t just HMRC you should be worried about.
Your subcontractors can also make valid claims against you if the facts indicate employment.
It is easy to feel safe in the knowledge that your workers are happy being self employed.
When things change
The reality is that if circumstances change and the facts indicate that your workers should be employed then you are liable to pay HMRC PAYE and NI and your workers are entitled to all the other benefits of employment.
Compare that with having them classed as self-employed where you only have to worry about paying over CIS tax!
In summary
When engaging workers in the construction industry it is essential you get their status right from the start of an engagement.
If you are happy that based on facts the worker is self-employed you should review the engagement on a regular basis to ensure that nothing has changed and that the worker should really be classed as employed.
Get it wrong and you could be looking at a huge bill as well as potentially additional salary payments due to your workers!
Employment status and the construction industry are minefields so please take specialist advice.
Our Services
To read more about our services please see our related pages below:
Building & Construction Businesses
Blogs related to employment in construction
Take a look at our other blogs on the topic of employment in construction
Warning! Doing works on a property? You might need to operate a Construction Industry (CIS) scheme.
What to do if your subcontractor or consultant disputes your decision to assess them under CIS
The content in this blog is correct as at 17th January 2024. See terms and conditions.
