Recent discussions with clients make it clear that the industry practice for tutors varies, and that some clients employ tutors while others wish to keep them as self-employed. Either course of action can be right, both in law and also for any organisation but it is important to establish the employment status from the beginning of the relationship, because this will determine their legal rights and protections and the obligations the employer owes to them. From an immigration perspective, the question is one which will determine whether right to work checks need to be carried out.
There are three broad types of employment status; an individual may be:
- an employee
- a worker
- self-employed (including partners and other office holders).
In any consideration of employment status, the main questions to be asked are:
- is the individual required to provide their service personally? If a substitute can be sent personal service may not be a crucial requirement of the relationship;
- is there an obligation on the employer to provide work and an obligation on the individual to do that work if provided? If not, there may not be mutuality of obligation between the parties;
- does the employer exercise sufficient control over the way in which the individual carries out the work for the relationship to be properly regarded as an employment relationship? If the individual is free to complete the work as they see fit this points towards self-employment (although, in the modern workplace, the question of control can be difficult to establish, particularly if the worker is senior).
Establishing mutuality of obligation is likely to be the key issue for tutors and sessionals. There will often be two issues:
- whether they are employees during the periods when they are working;
- whether they can link those periods together by establishing sufficient mutuality of obligation during the periods when they are not working.
Implications of status
It is important to establish an individual's status, as that determines what rights they have and how they should be treated. Individuals who are employees enjoy the highest level of legal protection. For example, employees may not be unfairly dismissed, are entitled to statutory redundancy pay and maternity and other family leave and pay rights.
Even if tutors are not employees, they may still be workers if they provide services personally under a contract and the other party to the contract is not a client or customer of a business run by the individual. Therefore, if:
- the individual is genuinely able to substitute another to carry out their work, they may not be a worker; or
- the individual runs a tutorial business finding colleges, or indeed students to buy their services, the organisation may be a client or customer of the business (and the tutor not therefore a worker).
If neither applies it is likely that the tutor will be a worker and still have valuable statutory entitlements, for example to be paid national minimum wage and to a minimum period of annual leave and other rights under the Working Time Regulations 1998, and subject to the relevant thresholds, be entitled to be auto-enrolled into a workplace pension.
The self-employed, those who are essentially in business on their own account and have no obligation to render personal service, have few employment rights, although they are protected against discrimination.
Given the legal implications, many colleges want to contract with workers on the basis that they are not employees. However, achieving this can be problematic: even clear contractual provisions stating that the individual is not intended to be an employee will not be sufficient if the substance of the agreement between the parties does not, in fact, reflect this.
It is important to realise that the labels applied by the parties and the contractual documentation will not be determinative of employment status; what actually happens in practice will be just as important.
It will help if employers keep a clear distinction between their workers and their employees, for example, by not labelling them as employees for internal purposes and not providing the same benefits as given to employees.
Organisations must also be aware that in addition to employment rights employment status also determines whether the individual should be taxed under PAYE or whether they will be accepted as being genuinely self-employed by HMRC. While employment and tax status will often be the same, it is however possible for an individual to be treated differently under employment and tax laws as they do not use identical tests and being considered self-employed by HMRC will not necessarily mean that the employment tribunals will consider a tutor as self-employed (or vice versa). Both the employment tribunals and HMRC will look at all aspects of the arrangement to make a decision and they can reach different conclusions given no single test will be conclusive in all cases. However a finding that an individual is an employee in the employment tribunal will be cogent evidence to HMRC that the individual should be taxed accordingly.
Further in the event that HMRC audits an organisation's contractual arrangements, there is a significant risk that it will look to make “self-employed” tutors employees. As such it may well be easier to employ this group from the outset, even if they are then taken on as casual members of staff.
Identifying and applying the correct status to seasonal teachers and tutors requires institutions to consider their position in relation to whether or not a prevention of illegal working check needs to be carried out. From an immigration law perspective, if the person is deemed not to be self-employed then this will trigger the obligation on employers to have carried out a right to work check under the Prevention of Illegal Working legislation prior to allowing the person to commence employment. Employers can be liable for payment of a civil penalty if they are found to be providing work to someone without the right to work in the UK. Such action can have serious ramifications for those who hold or need to apply for a sponsor licence.