If you have read every online article, searched every web page and are still left bewildered on the topic of employment status – don’t worry, you aren’t alone.

The case of Gary Smith and Pimlico Plumbers has made headlines as it raises the question whether a person is a contractor, an employee or a worker. In this article, we explain Mr Smith’s appeal – and more importantly – what it means for your company.

Mr Smith vs Pimlico Plumbers; the appeal

Gary Smith had been working for Pimlico Plumbers Ltd between August 2005 and April 2011 as a plumbing and heating engineer. Mr Smith worked under two written agreements, both of which had been created under confusing terms.

In August 2011, Mr Smith issued proceedings against Pimlico Plumbers to the employment tribunal. Mr Smith alleged he had been dismissed unfairly, had his wages deducted unlawfully, not received payments for annual leave, and had faced discrimination due to his disability.

The employment tribunal ruled that he had not been an employee under a contract of employment so his dismissal had not been unfair. Instead, Mr Smith was classed as a ‘worker’ and with this title he could proceed with the other three complaints against Pimlico Plumbers.

The Appellants, Pimlico Plumbers Ltd and Mr Charlie Mullins (the owner of the company) had appealed the decision to an appeal tribunal and Court of Appeal. Both appeals were unsuccessful and so they consequently appealed to the Supreme Court, which also dismissed the appeal. The Supreme court ruled in favour of Mr Smith, agreeing that he had workers’ rights.

What’s the difference between a worker, an employee and a contractor – no, this isn’t the start of a bad joke

HMRC has a set of criteria to help distinguish whether someone is a worker, contractor or an employee. It can be very difficult and confusing to differentiate between the three – even with the guidance provided.

An employment tribunal has the power to make the final decision on someone’s employment status, like in the case of Mr Smith. When making their decision the tribunal look at the employment relationship between the business and person.

Are you a worker?

If the following apply to you – you are most likely a worker. The list below are the key points; however, you should visit gov.uk/employment-status to gain a better understanding if this applies to you.

• Your contract uses terms such as ‘casual’ and ‘zero hours’ or similar language
• You are obliged to turn up to work and can’t send someone else to do your work
• You work under the supervision or control of a manager or director
• The business isn’t obliged to offer you work, nor do you have to accept any work that is offered
• A contract or agreement to complete work personally for a reward
• The business deducts tax and national insurance contributions from your wage
• You aren’t working as part of your own limited company in an arrangement where an ‘employer’ is really a client

Are you a contractor?

If you run your own business and take responsibility for its success and failure – you are most likely a contractor or self-employed. With this job title you do not receive payment through PAYE, nor do you have the rights and responsibilities of employees, such as entitlement to sick pay.

You may be regarded as self-employed by HMRC for tax purposes, even if your status in employment law differs.

You can be self-employed and employed at the same time, such as working shifts during the day and running your own business in the evenings.

Are you an employee?

If the following apply to you – you are most likely an employee. As stated previously, the below criteria are the key points to identify an employee, not a full list.

• You must work regularly unless on holiday, sick or maternity leave.
• You receive holiday pay
• Your contract sets out redundancy procedures
• You can join the businesses pension scheme
• The business you work for deducts tax and national insurance contributions from your wages
• You work at the businesses premises or alternatively at an address specified by the business
• The materials, tools and equipment you work with are provided by the business

Those hit the hardest – the ‘gig economy’

If you are a worker, then you are a part of the ‘gig economy’. Unfortunately, this job role has the most confusion and concern surrounding it. The term gig economy describes a short-term contracts and freelance work. Workers are in the gig economy as they do not receive a permanent job, or a regular wage.

Mr Smith is an example of someone who was a part of the gig economy and many more cases like his have been taking place recently. The high-profile nature of these tribunal rulings has created a spike in zero contract workers ringing the ACAS helpline.

HMRC provide the ACAS helpline to issue advice about employment status, employment rights and employer responsibilities. ACAS has received many calls from workers who wanted advice on non-standard working arrangements – such as offers of work declining after informing an employer they had become pregnant or terminally ill.

Although workers are currently experiencing a lot of uncertainty regarding employment status, there are advantages associated with being a worker, such as flexible hours.

We all want clearer instructions and criteria surrounding the topic of employment status, but we must wait for the government to produce these resources. Hopefully, we will not have to wait long for this new recourse as the confusion regarding employment law increases – as does the amount of cases heading to employment tribunal.

In your situation, what’s the best way to keep costs under control and increase capacity when looking to expand your workforce, howsoever they are classified? Call us today on 01606 333900 or email hello@burtonbeavan.co.uk.