What factors point to false self-employment?

It’s easier to answer this question by explaining what genuine self-employment looks like. Genuinely self-employed people are in business on their own account, providing services freely to their own clients and customers, as opposed to being integrated into another organisation and providing services to their customers on their behalf.

Genuinely self-employed people often employ their own workers.

The genuinely self-employed have few employment rights. They don't qualify for the National Minimum Wage, sick pay or holiday pay, they are responsible for their own tax and national insurance, and they are excluded from pensions auto-enrolment.

This lack of statutory rights explains why some bad employers are tempted to pretend their workforce is self-employed when this is not the case. This is known as false self-employment.

In general, a genuinely self-employed person normally:

  • Provides their own equipment;
  • Is not made to wear a branded uniform, or drive a branded vehicle;
  • Is free to work for other organisations if they want to;
  • Is free to engage other people of their choosing to work alongside them, for example apprentices or sub-contractors;
  • Takes on the financial risks of business failure and profits from business success;
  • Is responsible for their own expenses;
  • Has genuine control over pricing and invoicing;
  • Is not paid 'wages' and is not entitled to the National Minimum Wage;
  • Pays their own tax and national insurance;
  • Is not subject to a formal ‘performance appraisal’ process by the organisation for which they work, either directly or via customer review or 'feedback';
  • Is not tightly controlled as regards the way tasks are performed;
  • sets their own hours and is not closely monitored by the organisation for which they work (for example through 'vehicle tracking' or other forms of software);
  • Takes holidays when business demands allow, and saves up to cover the cost of holidays because there is no 'holiday pay';
  • Does not get sick pay;
  • Is not subject to a disciplinary procedure; and
  • Cannot be 'sacked' or dismissed. Instead, termination of an arrangement of genuine self-employment will be on the basis of the commercial terms that were negotiated between the business and the service provider at the start of the transaction.

Bad employers often devise their contract documentation carefully to make it look as if their workforce is 'self-employed' when it is obvious from their actual working practices that this is not the case.

It is also not unusual for an organisation to create careful documentation identifying their workforce as self-employed and negating the presence of any sort of employment relationship, while at the same time advertising to customers and/or the public that the organisation has a workforce of employees that is under their control and able to respond to customers’ needs at any time during business hours.

Many workers have no choice as to the terms and conditions they accept if they want to be allowed to work. They know that if they don't sign on the dotted line, there will be no work. Workers with limited English may not even be able to read these terms.

Employment tribunals know that large employers can engage legal advisers to devise documents that are designed to make it look as if a relationship is one of self-employment when this is not the case. They will look at the reality of the situation – including the inequality of bargaining power between the two sides – when deciding the true nature of the relationship.

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.