The rules around contracting self-employed workers

The recent Uber taxi drivers case sheds new light on the legalities surrounding employing external practitioners in salons, explains David Wright.

The number of room renters and self-employed contractors grows year on year in the beauty industry; but so too does the number of employment tribunal cases against companies who use their services. Contracting self-employed workers can be an attractive option for salon owners, not least because of savings in tax, National Insurance, holiday pay and sick pay. But HMRC has taken an increasing interest in the legitimacy of self-employment practice in salons as it loses them hundreds of thousands of pounds in revenue annually.

Defining “self-employed”
In a recent case a salon owner asked his self-employed therapist to arrive at work 30 minutes before opening time to set up the salon and join a daily team meeting. She grumbled to her colleagues about having to attend staff meetings when she wasn’t employed by the salon and so wasn’t earning anything at this time. The owner felt she was deliberately undermining him, decided not to use her services anymore and gave her notice.

She took her claim to an employment tribunal, saying she was effectively an employee and had been unfairly dismissed. The tribunal decided she was an employee as she worked to a rota, had a specific break time and had to be available even if she had no clients, so she wasn’t free to operate her business independently or work elsewhere. She won her case for compensation. The fact someone pays their own tax and insurance doesn’t automatically make them self-employed.

The Uber case
In another recent and highly publicised case, Uber taxi drivers won the right to be classed as workers rather than selfemployed. “Worker” is legally a different classification to “employee”, but the key issue is the drivers are now (subject to appeal) entitled to receive 28 days’ holiday and minimum wage.

HMRC has provided indicators of what self-employment is, and you can use them to check your own status or that of any individuals you give work to. These guidelines say the person in question:

• Should exercise independent control and judgement over how the work is carried out
• Would normally work for a number of people
• Has the right to appoint a substitute and is not necessarily required to carry out work personally
• Can decide whether or not to accept offers of work and has the option to determine their own working hours
• Has to correct faulty work at their own cost and in their own time
• Provides their own materials and equipment.

If you look at some of the features of the Uber taxi drivers’ case that were found by the court to be inconsistent with them being self-employed, you can see how they relate to the salon market.

1. Uber claimed each driver made a contract with each passenger and the company was merely their agent. In reality, the passenger booked through the company and the driver accepted the booking. You can see the vulnerability if a salon deals directly with clients for bookings and payment of a practitioner’s services

2. Uber interviewed drivers to assess their suitability, which looks like recruitment

3. Uber retained the passenger’s contact details and took their money. This is typical in many salons, indicating they are the salon’s clients

4. Effectively drivers had to accept trips – much like a therapist who has no control over bookings

5. Uber handled complaints against drivers and issued rebates. For salons, your contract should be explicit that the therapist deals with all complaints about their work.

The case is a useful reminder to review your current practices and written agreements. Remember, many individuals choose self-employment for the additional freedoms and earning potential, and they too face challenges if they are assessed as employees or workers. For example, if they earn enough, the National Insurance contributions are higher for a worker than someone who is self-employed. They would also become liable for PAYE and lose some of the advantages of self-employment.

David Wright is a consultant in all aspects of employment practice and law. He is the main employment law consultant for Habia and provides a personalised support service for UK salons.