10 May 2022
A key employment rights area the government has said that it will regulate on several occasions, but shows no sign of having grappled with yet, is to provide clarity on working status.
This is despite the House of Lords recently reminding government, when looking at the off-payroll rules commonly known as IR35, that The Taylor review recommended that tax law and employment law should be more closely aligned, with employment status not open to as much ambiguity as it is currently. This would give businesses the ability to easily determine the correct status to be applied.
How does this failure to provide a statutory test on working status help employers when employment law still changes almost daily but through case law, which is much less visible to businesses and other organisations? And when businesses need to apply the correct status for tax – off-payroll contractor or employee; or for employment law – contractor, worker or employee, deducting the correct tax and NIC plus providing the correct legal rights, for example holiday pay and sick pay.
Also, recently, different legal cases covering the employment rights and employment taxes areas have applied different treatment to tackle misdescriptions of status.
We are left with the vague concept the courts emphasise that, although findings of control and mutuality of obligation are necessary pre-requisites to employment, their existence does not necessarily create a presumption of employment. Instead, if those pre-requisites exist, the court's task is to examine all relevant factors, both consistent and inconsistent with employment, and determine, as a matter of overall assessment, whether an employment relationship exists. In doing so, the level of control and mutuality could be factors to take into account.
What should employers, who want to do the right thing but may have atypical working arrangements for good business reasons, do when the almost 20-year-old official case law guidance is to paint a picture? Or they’ll know what the status is when they see it. This gives them no certainty at all.
Despite this, the government does not appear inclined to provide employers with any greater clarity through a combined employment legal and employment tax status test any time soon.
Businesses would be wise therefore to keep this area continually under review to ensure they understand the risks and total cost of their workforce decisions.