Contractor Employment – Under IR35 who employs IT Contractors?

Contractor Employment
Contractor Employment

Contractor Employment

Contractor Employment is a tricky subject when it comes to IR35. We get an expert to look at it on behalf of contractors. Here he gives his expert opion.

With recent high profile court cases indicating that the responsibility for contractor rights now sits firmly on the shoulders of end user companies, Rob Crossland of recruitment services provider, Parasol Ltd., reviews the various umbrella services company structures in existence. He considers. tehrefore, how end users may best protect themselves against the risks of residual taxation claims and the impact of ‘inferred‘ employee rights.

‘Over the last couple of years, two legal cases in particular have forced end users to review the basis of their relationships with recruitment agencies,’ comments Crossland.

Contractor Not an Employee

‘Where previously it had been assumed that the contracting individual was not in fact an employee of anyone, in the case of Dacas V Brook Street Bureau Mrs Dacas was a cleaner seeking unfair dismissal against Brook Street Bureau and Wandsworth Council), the Court of Appeal stated that had the end user been a party to the appeal it would have referred the matter back to the Employment Tribunal.

‘Moreover, this was on the basis that there was significant evidence that Mrs. Dacas was an employee of the end user. This is because the contract implied that she was under a contract of employment. So, the strong implication is that Mrs Dacas is an employee of the end user.

Cable and Wirless v Muscat

‘This decision was further compounded,’ continues Crossland, ‘by the EAT‘s decision in the more recent case of Cable and Wireless V Muscat. It was found that ‘express terms in a contract between the agency and worker cannot affect the existence of an implied relationship between the worker and end user‘.

It is, therefore, not surprising to learn that many end users are now re-evaluating their relationships with recruitment agencies. Moreover, they are clearly becoming concerned about the consequences of being liable for:-

  • residual taxation,
  • unfair dismissal,
  • annual leave,
  • sick pay,
  • maternity benefit and
  • numerous other employee rights claims made by professional contractors.’

Breaches in Employment Law

There’s the very real likelihood that agency workers may be able to claim against a whole range of perceived breaches in Employment Law and the Working Time Directive by end user companies. That’s whilst they continue to enjoy the enhanced income opportunities that self-employment can provide,

Crossland urges end users to ensure their processes and procedures involving the use of contractors are legally compliant and watertight.

Shorter Term Contracts

‘Such organisations may choose to minimise risk by embarking on shorter term contracts to negate the likelihood of claims,’ he continues.

‘Alternatively, they may seek-out assurances from recruitment agencies regarding the settlement of legal costs. Another possible course of action could be for end users to encourage their agencies to review the type of umbrella services provider employed by their contractors. This would be to ensure that they achieve complete legal compliance – and not simply a maximum ‘tax-friendly‘ salary.’

So, Contractor Employment and who employs them remains a tricky issue.