Reducing risk is not a simple procedure

Your legal analysis on agency workers (Personnel Today, 23 August) may oversimplify the question of employment status (and the ways of reducing risk) and could be misleading.

I would be concerned if Personnel Today readers took the view that they could address these issues by including certain terms in their contracts and having a break between the end of the temping contract and the start of employment.

First, it is wrong to assume that all temporary workers are ‘agency workers’ as some may be PAYE temps, contractors, freelancers etc. The question of employment status applies to all types.

Second, tribunals are now required to look at the reality of the relationship to decide whether there could be an implied contract of employment between the organisation and the individual. One of the key areas they consider is the degree to which the organisation ‘controls’ the worker. No amount of drafting or breaks between assignment can affect this issue.

Third, employment status potentially affects other areas, such as tax liability, VAT, entitlement to employment benefits, and compliance with the Sarbanes-Oxley Act. Organisations could be liable for PAYE and National Insurance contributions on a grossed-up and retrospective basis relating to temps and contractors, particularly if the authorities find evidence of them amending contracts with the sole purpose of ‘improving’ their workers’ self-employed status.

Finally, the costs of defending employment status claims can be high because there can be a number of parties (and, therefore, contracts containing conflicting or inconsistent terms) involved.

Frances Lewis
Associate, employment and resourcing department
Tarlo Lyons

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