A consultancy agreement or a contract for services would be suitable if you work for an organisation on the basis that you are genuinely self-employed and neither an 'employee' or a 'worker' of the company. This issue is important because both categories enjoy various protections and different tax treatment to those who are genuinely self-employed. Emplyees benefit from wide-ranging protection, including the right not to be unfairly dismissed. Workers do not enjoy all the same rights as employees, but they do have some protection, for example they have the right to paid holiday. You should be aware of this because it would be advantageous for an organisation to call you a 'self-employed consultant', when in reality you actually have the status of woker or employee.
- An employee is an individual who works under a contract of employment. For there to be a contract of employment there must, as a minimum, be an obligation to personally perform the work, mutually of obligations between employer and employee and the employer must have a certain amount of control over the employee's work. There are three elements to the definition of 'worker' :
1. there must be a contract to perform work or services;
2. there must be an obligation to perform that work personally; and
3. the individual will not be a worker if the provision of services is performed in the course
of a profession or a business undertaking and the end-user is a client or a customer.
In establishing employment or worker status, the courts and tribunals will look at the substance of the relationship, rather than the legal form or any labels that the parties have given to the relationship. Where an individual is, on balance, a self-employed contractor but there are some factors which point towards employment, it may be possible that they are found to be a worker, but not quite an employee.
A general guide is that a worker is likely to be self-employed if they:
- can decide what to do, where to provide their services, when to work and how they do their work
- risk their own money in their work
- can make a loss as well as a profit from their work
- provide the main items of equipment they need to do their job
- are free to hire other people to do the work they have taken on, or to take on helpers at their own expense
- are responsible for correcting unsatisfactory work in their own time and at their own expense
Commercial Agents Regulations
If you work for an organisation on this basis, you should consider whether or not you are a "commercial agent" for the purpose of the Commercial Agents (Council Directive) Regulations 1993 (the Commercial Agents Regulations). The Commercial Agents Regulations apply to all self-employed intermediaries with continuing authority to negotiate or conclude the sale or purchase of goods on behalf of another. If you are a 'commercial agent', you will enjoy rights under the regulations, for example as follows:
- You will be entitled to the same remuneration as other agents who are engaged to sell the same goods and who are operating in the same area.
- On terminaton of the agency arrangement, you will be (in addition to any damages for breach of contract) entitled to either an "indemnity" (which is a payment the parties agree represents a certain amount of forecast loss) or, if no indemnity has been agreed, compensation for damages which you suffer as a result of the termination.
- Minimum notice periods are implied into any agency arrangement.