The Gig Economy: The Pros and Cons of Taking on a Self-Employed Contractor

November 23, 2017

The rapid rise of temporary work arrangements, or the ‘gig economy’, offering flexible work is coming under increasing attack, as the Employment Appeal Tribunal recently confirmed that Uber drivers were workers, and not self-employed. So, what are the advantages to a business of engaging someone on a self-employed basis?

  • They provide a business with flexibility, without the administration that is often involved with employees, even those engaged on a short-term basis. Normally you have no PAYE or National Insurance contributions to administer – payments are made without deductions as you would pay any other supplier.
  • They are often available on short notice, no waiting around before they can start, and they don’t have the same legal protection as employees, like unfair dismissal, at the end of their employment contract.
  • They can provide expertise that a business wouldn’t otherwise have and are generally happy to be engaged for a short-term project. This allows the business and its employees to focus on core products and talents. However, it may not allow your employees to learn new skills, so the key is to balance the short-term need, with long term aims and staff development.
  • While day rates for self-employed contractors are usually more than is paid to employees, which may cause resentment amongst staff, they may be cheaper overall than an employee. Contractors don’t get employee benefits like holiday and sick pay, and many work from home so don’t need office space and equipment. In addition, the business doesn’t have to pay employer national insurance contributions.

However, you do have less control over a contractor (someone who is self-employed) than an employee. You can tell an employee how to do their job, when to do it and discipline them if they don’t. With contractors, you are relying on their expertise to ensure that they achieve the task that they are engaged to perform and if their role is very specialist, no one in the business may have the expertise to quality control their services. In addition, they may not know your working practices and procedures, which can cause conflict amongst staff.

There can also be tax implications if you call an individual a contractor when they are an employee. So, you need to get it right otherwise you may face claims from HMRC for underpaid tax, penalties and interest. Make sure that it is clear both in the contract that you have with the self-employed contractor and in your day-to-day interaction with them, that they are self-employed and independent of your business.

You won’t own any intellectual property that they create, unless you have a well-drafted contract transferring it to the business, unlike an employee where most of the intellectual property that they create at work is owned automatically by their employer.

So how does your business take on staff? What do you think would be best for you, keeping in mind the above?

Louise Paull, LawBite Employment Lawbrief

If you have any questions for Louise about employment legal matters or any other legal aspect of your business you can have a FREE consultation by submitting a request here or call us today on 020 7148 1066.

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