News and Events

Employment status of agency workers

  • Posted

Crombie Wilkinson Solicitors is warning that a recent tribunal case over the employment status of agency workers identified the unfettered right to appoint a substitute as one of the key indicators of employment status.

In HMRC v Talentcore Ltd, the tribunal found in favour of the agency workers in a row over whether or not they were employees and therefore subject to PAYE and National Insurance contributions.

HMRC argued that even if the contract was not a contract for personal service, the right to send in a substitute wasn’t relevant where the right was never invoked and the individual felt obliged to do the work personally.

Neil Largan from Crombie Wilkinson Solicitors said “In this case the tax authority claimed that Talentcore’s oral contract with the agency workers didn’t give free reign to appoint a substitute."

In practice, Talentcore’s main concern was that the shifts were covered.  It did not want excessive use of substitutes but at the same time it was not particularly concerned as to which member of the team of agency workers did the work." 

The tribunal ruled that even if an “employer” expresses a preference for an individual to do the work personally rather than appoint a substitute, and insists any replacement is suitably qualified, this doesn’t restrict the individual’s right to send in a substitute.

The case highlights two important factors when considering employment status.

For a contract to be one of service (i.e. employment) as opposed to one for service (self-employment) the contract must require the services to be provided personally by a named worker and not a substitute

The vital message is, if an individual has an unfettered right to send in a substitute, then the arrangement cannot be one of employment, because there is no requirement to provide the services personally.

Therefore even if the “employer” exercises some supervision, direction or control as to how the individual provides the services, he is unlikely to be an employee.

To minimise problems with HMRC over the status of self-employed individuals, businesses should include a substitution clause in the contracts, even where it is obvious they are self-employed.

The author is a Director in Crombie Wilkinson Solicitors, members of UK200Group.