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Are you employed or self-employed?

Your role, rights and responsibilities as an employee

paperwork.pngIf you are ever late for work, or you need an extra day’s holiday do you worry about speaking to your boss? Or are you the person who has to pay all the bills, including the wages of your staff? Employment issues can be a real headache.

Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as: "A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed."

Are you employed or self-employed?

Whether you’re employed or self-employed depends on the terms and conditions of your work. It’s important to know your employment status because it affects your employment and benefit rights, and how you pay tax and National Insurance.

You can usually work out your employment status by asking a few straightforward questions. The most obvious one being would you be in trouble with anyone if you were late for work. Other indicators of your being self-employed include the following:
– run your own business and take responsibility for its success or failure
– can decide how, when and where you do your work
– if you deal with more than one paying customer, or have the choice to do so (maybe for example you are freelance) 
– are free to hire other people to do the work for you or help you at your own expense
– provide the main items of equipment to do your work

On the other hand you are more likely to be deemed employed if the following apply:
– you have to do the work yourself
– you work for one person at a time, who is in charge of what – you do and takes on the risks of the business
– someone else can be told how, when and where you do your work
– you have to work a set amount of hours
– you are paid a regular amount according to the hours you work, and get paid for working overtime – even if you do casual or part-time work, you can still be employed

There’s no legal definition of employment or self-employment, so if there’s a doubt about someone’s status the decision is made by referring to previous judgments – known as ‘case law’. A piece of case law is a written decision of a real case from the Court and the principles of that judgment act as a guideline for future cases. In summary it is a question of who is in charge, the relationship you have with your customers, and how you are paid. 

Financial implications if you are self-employed

You are responsible for your own tax and National Insurance contributions. This means telling HM Revenue & Customs (HMRC) about your income by filling in a Self Assessment tax return. You must register as self-employed with HMRC within three months, or you may have to pay a fine. You can download a registration form from the HMRC website http://www.hmrc.gov.uk/index.htm, or you can register by phoning the Newly Self-employed  helpline on 0845 915 4515.

The website itself is very good and is worth reviewing in terms of general advice on all aspects of tax, benefits and obligations whether you are self-employed, an employer or an employee. 

…. or employed

If you are employed your employer is responsible for deducting and paying your tax and National Insurance contributions through the PAYE (Pay As You Earn) system. You are also entitled to certain rights and benefits, such as maternity or paternity leave, sick pay, Jobseeker’s Allowance if you lose your job and a State Pension (including the additional State Pension) when you retire.

Your role, rights and responsibilities as an employee

Employment entails an arrangement between yourself as an employee and your employer. Yes, you are expected to go to work on a regular basis, to fulfill your job title, and in return you should expect to receive a reward, normally financial. Expectation entails a mutual dependency and trust.

An employment contract, or ‘contract of employment’, is an agreement between an employer and an employee which sets out their employment rights, responsibilities and duties. These are called the ‘terms’ of the contract. Your employment contract does not have to be in writing. The employment contract is made as soon as you accept a job offer. If you start work it will show that you accepted the job on the terms offered by the employer, even if you do not know what they are.

If there is anything in your contract that you’re unsure about, or which is confusing, ask your employer to explain it to you. It should be made clear what is a legally binding part of your contract and what is not. The legal parts of a contract are known as ‘terms’.

If either you or your employer breaks (the legal word being “breach”) a term of the contract, the other is entitled to sue for breach of contract. You and your employer are bound to the employment contract until it ends (usually by giving notice) or until the terms are changed (usually in an agreement between you and your employer).

Written statement of employment particulars

If you are an employee who has been working for your employer for longer than one month, you have the legal right to receive a written statement of employment particulars within 2 months of starting employment. It is not necessary, however, for all the information to be given at the same time. It can instead be given in separate documents or instalments if this is more convenient, provided that certain particulars are collected together in one single instalment, referred to in the legislation as the principal statement.

The particulars which must be included in the principal statement are:
– the names of the employer and the employee;
– the date when the employment (and the period of continuous employment) began;
– remuneration and the intervals at which it is to be paid;
– hours of work;
– holiday entitlement;
– job title or a brief job description; and
– either the place of work or, if the employee is required or allowed to work in more than one location, an indication of this and of the employer’s address.

Although the principal statement must take the form of a single document, employers may find it convenient to meet this requirement by attaching photocopies of relevant extracts from staff handbooks or other literature and making it clear in the statement that these contain part of the information required to be given.

What information must the written statement include?

The written statement must cover:
– the names of the employer and the employee;
– the date when the employment (and the period of continuous employment) began;
– remuneration and the intervals at which it is to be paid;
– hours of work;
– holiday entitlement;
– entitlement to sick leave, including any entitlement to sick pay;
– pensions and pension schemes;
– the entitlement of employer and employee to notice of termination;
– job title or a brief job description;
– where it is not permanent, the period for which the employment is expected to   continue or, if it is for a fixed term, the date when it is to end.
– either the place of work or, if the employee is required or allowed to work in more than one location, an indication of this and of the employer’s address; and
– details of the existence of any relevant collective agreements which directly affect the terms and conditions of the employee’s employment – including, where the employer is not a party, the persons by whom they were made.

The letter offering you the job, or your employment contract, could be your principal statement or full written statement. Most of the required employment details must be set out in the written statement itself. However, there are a number of exceptions:
– entitlement to sick leave, including any entitlement to sick – pay
– pensions and pension schemes
– disciplinary rules and disciplinary or dismissal procedures
– further steps (such as appeal procedures) under the disciplinary, dismissal or  grievance procedures

For these details, your employer could point you to another document which you have a reasonable opportunity of reading. For example, a staff handbook made available in the staff room or on the company website. Your employer does not need to set out your notice period in the written statement. Instead, they could refer you to the relevant legislation or to a collective agreement.

Where do contract terms come from?

Contract terms can come from a number of different sources; for example they could be:
– verbally agreed
– in a written contract, or similar document
– in an employee handbook or on a company notice board
– in an offer letter from your employer
– required by law, for example, your employer must pay you at – least the minimum wage
– in collective agreements (see below)
– implied terms (see below)
– Collective agreements

Employers sometimes make agreements with a trade union or staff association. These are know as ‘collective agreements’. Your contract should make it clear which agreements apply to you and who can negotiate on your behalf. These agreements can apply to you even if you’re not a member of the trade union or staff associations.

Implied contract terms

Implied terms aren’t written down anywhere, but are understood to exist. If there is nothing clearly agreed between you and your employer about a particular matter, then it may be covered by an implied term. Terms can also be implied because they are necessary to make the contract work.

The most important of these is the ‘duty of mutual trust and confidence’. This means that you and your employer rely on each other to be honest and respectful. For example, your employer trusts you not to destroy company property, and you trust your employer not to bully you or to discriminate against you. This duty of care on the part of the employer applies also to the actions of fellow employees, customers or other third parties with whom you might come into contact during your working day or even at work-related events.

Terms that are obvious or assumed

Some terms are not included either because they are so obvious that it is not felt necessary to write them down, or because it will be assumed that such a term exists.

An example of this might be where a contract provides for sick pay without saying how long it will be paid. It will be assumed that it is not intended to be paid forever.

Terms implied by custom and practice

These are specific to an employer or kind of work. They are arrangements that have never been clearly agreed but over time have become part of the contract. For example, you might get a Christmas bonus every year, or the business might close early on particular days. If a company practice has become a part of your contract then your employer must stick to it, and cannot normally change it without your agreement. Clearly this can be difficult to prove as it is not in writing, and normally if a practice becomes regular and expected such as a Christmas bonus an employer will want to exercise control over it by putting it in writing in the contract.

Information included in other workplace documents

Most of the required employment details must be set out in the written statement itself. However, there are a number of exceptions:
– entitlement to sick leave, including any entitlement to sick pay
– pensions and pension schemes
– disciplinary rules and disciplinary or dismissal procedures
– further steps (such as appeal procedures) under the disciplinary, dismissal or grievance procedures

For these details, your employer could point you to another document which you have a reasonable opportunity of reading. For example, a staff handbook made available in the staff room or on the company intranet.

Your employer does not need to set out your notice period in the written statement. Instead, they could refer you to the relevant legislation or to a collective agreement involving a trade union or staff association. Your employment contract should make it clear which agreements apply to you and who can negotiate on your behalf. These agreements can apply to you even if you are not a member of the trade union or staff association.

Contract to provide services

If you have a ‘contract to provide services’ or a ‘contract for services’ with someone, then this is different from an employment contract and generally means you are self-employed. A contract to provide services is an agreement between you and another person to undertake some work for them (for example do some plumbing). You do not become an ‘employee’ for this person – you just provide them with a service.

If you are a temporary agency worker you may be contracted with your agency under a ‘contract for services’.  Your agency, as an employment business, will be obliged to provide you with a written contract.

What to do if you have a problem

What is a breach of contract?

A breach of contract happens when either you or your employer breaks one of the terms (for example, if your employer does not pay your wages, or you do not work the agreed hours). Most questions about breaches of contract can be answered by checking the terms of your contract.

If you think there’s been a breach of contract, check the terms of your contract to make sure. If there has, you should try to sort out the problem directly with your employer first of all.

If you are nervous about doing this, you could contact the Advisory, Conciliation and Arbitration Services (Acas) for help, 08457 47 47 47, or visit their website at http://www.acas.org.uk. This is an independent organisation and will be able to give you general advice to confirm your rights, and may discuss the possibility of mediation between yourself and your employer.

If you are a member of a trade union, it would be a good idea to speak with them before taking any legal action, as some unions provide a legal advice service for their members. Otherwise, you could talk to a solicitor for a consultation as to the strength of your case and the range of actions open to you.

Disciplinary and grievance procedure

Your employer should make you aware in writing in your written statement of the disciplinary and grievance procedure, and make clear to you the following:-

– cover any disciplinary rules and any disciplinary or dismissal procedures which apply to the employee;

– specify, by description (for example job title) or by name, the person to whom the employee can apply and the manner in which an application should be made if he or she is dissatisfied with any disciplinary or dismissal decision relating to him or her, or for the purpose of seeking redress of any grievance relating to his or her employment; and

– cover any further steps which follow from the making of such an application.

These requirements do not apply to rules, disciplinary or dismissal decisions, grievances and procedures relating to health or safety at work.

Legal action

If you cannot sort the problem out with your employer, you can decide to take legal action. Think carefully before taking any legal action against your employer. Ask yourself what you want to achieve and how much it will cost. For example a former employer may have gone bankrupt, and even if you win your case there might be no money to pay you. Also remember that taking legal action might prompt your employer to take out a counter-claim against you if they feel they have one.

Employment Tribunal

If you do decide to take legal action, it can either be through an Employment Tribunal (Industrial Tribunal in Northern Ireland) or through a civil court. To make a breach of contract claim through an Employment Tribunal, your employment must have ended. There are restrictions on the types of claim that can be made (for example, you cannot make a personal injury claim through the Employment Tribunal). Employment Tribunals are cheaper and often quicker than the civil courts.

Civil courts

To make a claim while you are still employed you will normally go through the small claims track of the county court or other civil court.

The time limit for making your claim to a civil court is longer than the time limit for complaining to an Employment Tribunal. The award that a civil court could make is unlimited

Breach of contract by an employee

If you breach your contract, your employer should try to settle the matter with you informally. If your employer suffers a financial loss because of your breach, they could make a complaint for damages (financial compensation) against you.

Damages are only awarded for financial loss. For example, if you don’t give enough notice your employer could claim for damages from the extra cost of hiring temporary staff to do your work, or for lost revenue. You would still have the right to wages you earned before you left, plus pay for untaken statutory holiday.

The most common breaches of contract by an employee are when you quit without giving (or working) proper notice, or when you go to work for a competitor when your contract doesn’t allow it.

Guide published 23 June 2009.

by David O’ Neill
Solicitor

The above article is meant to be relied upon as an informative article and in no way constitutes legal advice.
For legal advice regarding your case, please contact Cartwright Adams Solicitors on 0207 887 7556 for a Consultation with a Solicitor.

Cartwright Adams Solicitors
Berkeley Square House
Berkeley Square
Mayfair – London W1J 6BD
Direct Dial: 0207 887 7556
Fax: 0207 887 7555
Mobile: 07966 535540
Email [email protected]

www.cartwrightadams.co.uk

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