Employers can now used an Employment Status Indicator that is available online on the HMRC website.

The decision as to whether a worker is self-employed or an employee is not for the parties to decide and there are various factors that can be taken into account. The responsibility lies primarily on the employer to make the right decision and the cost of getting it wrong can be significant. The tool is designed to help employers, workers and even accountants to decide whether a worker is an employee or self-employed.

After answering a series of mainly YES/NO type questions, an answer is provided.

However, you should be aware that the tool has serious shortcomings.

Firstly, the result is only an indication of employment status. It is not a definitive or legally binding opinion.

Further, HMRC have admitted that the tool will not always give the correct result. This could of course be something to use when an employment status officer tries to persuade you that the tools result must be true.

The tool asks three questions:

1. Contractually obliged - Under the terms of their contract, if the worker is unable or unwilling to carry out the work personally do they have to provide someone else to do it? Answer is YES or NO
   
   
2. Obligation reflects reality - Does the contractual obligation to provide a substitute reflect what happens or would happen in practice if the worker were unable or unwilling to carry out the work personally? Answer is YES or NO
   
   
3. Payment to worker - Under the terms of the contract, does the worker have to pay the other person brought in to do the work in their place? Answer is YES or NO.

If you answer YES to all these questions, the worker is probably self-employed. However, answer YES to the first question and then NO to the second and the tool tells you: "Based on the information you have provided, the employment status cannot be determined."

This is not necessarily a lot of help, because often the opportunity to provide a substitute is rare. In many cases, it is impossible to find someone to slip into the role at no notice who can do the job.

Whilst this tool, may be useful as a first step, for a more accurate assessment of the employment status of any workers, please contact us for further advice.

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