The specialist tax consultancy for contracting professionals, Qdos Contractor, and the Association of Independent Professionals and the Self Employed (IPSE) have renewed calls for a clear statutory definition of genuine self-employment.
Benedict Smith of Qdos Contractor emphasised how vital it has become in the context of a changed work landscape for each party in the supply chain to be able to distinguish between a genuinely self-employed individual, a gig worker, and an employee.
He suggests that Matthew Taylor’s proposal for a new ‘dependent contractor’ status may help bring much-needed clarity. ‘Worker’ status in existing employment law is similar but the dependent contractor definition would, he says, help distinguish between a relatively low-paid gig economy worker and a highly-skilled independent contracting professional, many of whom can command pay rates of £700 a day and more.
Reforms to employment law capable of differentiating these three models of working could, Smith suggests, have significant implications for IR35 that may make it more capable of recognising genuinely independent contractors. Currently, the rules only recognise two categories – employment or self-employment – shoehorning individuals into one or the other.
Meanwhile, IPSE has formulated a ‘Self-Employment Matrix’ to achieve this differentiation, grouping working practices into four weighted categories in which genuine self-employment can be distinguished:
Autonomy: this implies a Lack of Mutuality of Obligation (MoO) (10 points if absent); Right of substitution (5 points if present); Using a substitute worker (10 points if present); Absence of exclusivity (5 points if absent)
Control: the worker controls the tasks he or she undertakes (15 points); the worker controls the methods by which the tasks are executed (10); the worker controls the number of hours worked (5 points)
Business risk: this covers whether the individual has responsibility for seeking new work and gets paid on a project-by-project basis (10 points), works for two or more clients (5), is engaged in activity defined as entrepreneurial (5) and sets the rate of pay (5)
Degree of integration in client organisation: this covers whether workers represent themselves or their clients in their work and includes Representation (5 points for not having to wear uniforms or represent the client) and use of Equipment and Tools (5 points for using own equipment)
Scoring is as follows:
65+ = Self-employed
50-64 = Likely to be self-employed
35-49 = Unlikely to be self-employed
<36 = Not self-employed
IPSE’s Policy Development Manager, Jordan Marshall writes: “IPSE believes policymakers should go back to a ‘first principles’ basis and consider which factors really make up genuine self-employment – using IPSE’s Self-Employment Matrix as a framework.”