I’ve been working for businesses looking to engage consultants/contractors and drafting consultancy agreements recently. It’s key to remember that one of the characteristics of a contracting arrangement is that the business has less control over those working for it. Having one or two of the controlling characteristics may not mean that your arrangement with a consultant or contractor is closer to an employment contract than a consultancy contract but the more you have the more likely it is to be employment rather than consultancy or contracting.
It is important to remember that in employment law it doesn’t matter what you call the arrangement. If a tribunal looks at the way a contract operates and believes that it is operating as an employment contract or the individual is a worker and the arrangement whatever it is called is not a consultancy contract, the contractor may well have status as an employee or a worker and all the employment rights that go with that.
The following is a list of some of the characteristics that may be considered when deciding whether the arrangement is employment or consultancy:
1. Can the consultant provide a substitute or are they required to provide the service personally? A requirement to provide personal service suggests a contract of employment not consultancy.
2. Who decides how the consultant’s work is to be done – is the individual required to follow a set process to do the work or do they determine how they will perform the contract themselves.
3. Who sets the hours worked – are they required to work hours dictated by the business. Employment requires the employee to work the hours the employer dictates, that is less typical of a consultancy arrangement.
4. Is there a uniform or a required form of dress? Again, requiring the individual to wear particular clothing suggests control is with the business not the individual.
5. Do they have the freedom to reject work? A consultant or contractor may refuse work an employee may not.
6. How long does the arrangement go on for. A consultant may be engaged for a specific task and the contract would end when the task is complete. An arrangement continuing for an indefinite period where the consultant is allocated tasks on an ongoing basis looks more like employment.
7. How is the individual treated and represented to the business’s customers. A consultant who is treated like the employees and represented to customers as an employee may well be an employee.
8. Are they free to work for other organisations including competitors – restricting where an individual may work or requiring them to get consent before working elsewhere is more typical of an employment relationship.
9. Who provides the equipment they need? An independent contractor will usually provide their own equipment.
10. Who takes the financial risk? An employee is paid the rate the employer sets for the work agreed. A contractor sets their own rate but does not get paid if there is no work for them.