An individual’s employment status determines their workplace rights and responsibilities. As an employer, it is important to be aware of the employment status of the people working for you, to ensure your obligations towards them are met. This guide will focus on the employment status of subcontractors in your workforce and the subcontractors’ rights you will need to be aware of in the context of your working relationship.
Subcontractor Rights at Work
There are three types of employment status recognised by UK law. A person working for you can be one of the following:
- An employee: someone on a permanent or indefinite contract, paid via the PAYE system. You are legally required to supply them with work; they are obliged to accept it.
- A worker: A person in casual employment i.e. someone on a temporary contract or supplied to you by an agency. Often but not always paid via PAYE. You may or may not be obliged to supply them with work; you will likely have less control over when, where and how that work is completed.
- A self-employed person: a contractor, subcontractor or freelancer who is their own boss. These persons are not paid by PAYE and are responsible for paying their own tax and National Insurance. A self-employed person has full control over the work they do.
Every person working for you has legally protected rights, though these differ depending on their employment status. Employees have the most rights, which include statutory sick pay, parental leave, breaks, protection against unfair dismissal, holiday pay, National Minimum Wage and redundancy pay.
Workers are also entitled to breaks, holiday pay, National Minimum Wage and similar benefits but overall have fewer rights than employees.
Members of your workforce who are self-employed are afforded the least protection under employment law. Self-employed people are in control of their own pay, hours and working conditions, and are responsible for paying their own tax and National Insurance contributions but not all people who pay their own tax are self-employed. Many working people who pay their own tax and NI are categorised as ‘workers’ in the eyes of the law, as they do not have the same control over their working situation as a truly self-employed person would have.
For employers, it is important to understand these distinctions as they determine the rights of the individual and your responsibilities towards them under law.
Is the subcontractor self-employed or a worker?
In practice, it can be difficult to distinguish between ‘workers’ and ‘self-employed subcontractors’, as there is notable cross over in the way the two are defined.
All self-employed people are responsible for paying their own tax and National Insurance and should not be paid via the PAYE system. Workers can be paid through PAYE, though it is also quite common for them to be paid using other less formal systems, such as “cash in hand”. In this latter situation, the worker would be responsible for making their own tax and National Insurance contributions, where applicable.
The clearest distinction between self-employment and being a ‘worker’ is that self-employed people have more control over the work that they do. The following points apply to most self-employed subcontractors:
- They are responsible for their own business, including losses and profits.
- They can choose the work they do and have control over how, when and where that work is carried out.
- They are not limited to working for one person or organisation.
- You agree a fixed price for the job, irrespective of how long the work takes to complete.
- They can hire other people to complete the work.
- They are responsible for fixing mistakes and unsatisfactory work at no additional cost.
- They use their own resources to pay for running costs, materials, equipment and other assets.
- You are considered their customer or client, rather than their employer.
If a subcontractor does not have the right to hire another person to complete the work and is not responsible for supplying materials and equipment, they probably qualify as a ‘worker’. The following points also apply to most workers:
- They have a contract or informal arrangement (written or otherwise) to work for you in exchange for money or benefits.
- You must provide work for them, for the duration of the contract.
- They are legally required to accept and complete the work provided.
- They have a conventional employer/employee relationship with you or your organisation.
Understanding subcontractor rights
Workers are legally entitled to National Minimum Wage, working time rights, union rights, health and safety protection and protection from discrimination. Self-employed people have very few automatic workplace rights, beyond the issues discussed below. However, it is commonplace for a self-employed subcontractor to establish terms such as working hours and the scope of the project they have been engaged to complete, in a written contract with their client or customer. This contract (often known as a ‘consultancy agreement’ or ‘contract for services’) affords the self-employed person some protection, in place of traditional employment rights.
If any person working for your organisation feels that their workplace rights have been breached, they may bring the issue before an employment tribunal. As an employer, you must understand subcontractor rights in order to meet your legal, ethical and financial obligations. Failure to do so could result in sanctions or financial penalties, if an employment tribunal found that a member of your workforce had been denied their basic employment rights.
Self-employed subcontractor rights
Self-employed subcontractors who are employed to perform a service or work on a project for your organisation are not entitled to the same rights as your employees and workers. For example, subcontractor rights typically do not include sickness leave, maternity pay, holiday pay or pension contributions. They are also not protected from unfair dismissal in the same way as your employees or workers, though there may be clauses regarding termination periods and conditions in the contract you established to set out the terms of their work.
Furthermore, you are not legally obliged to follow the same disciplinary and grievance procedures with a self-employed subcontractor, as you would be with an employee or worker.
However, subcontractor rights do include:
- Protection from discrimination in most cases.
- The right to work in an environment which meets health and safety standards.
- Any specific rights as prescribed within the relevant contract or agreement.
Protection from discrimination
A subcontractor’s right to protection from unlawful discrimination only applies if the subcontractor in question has been hired to carry out the work themselves; freelancers who hire or assign another person to carry out an agreed service are not protected from discrimination in the workplace, under employment law.
For example, the self-employed owner of a plumbing company you have hired to fulfil part of a construction contract does not have the right to protection from discrimination, if they themselves have not attended the site to perform or oversee work. However, a self-employed copywriter whom you have hired to work on a project personally would be protected.
Discrimination on the basis of protected characteristics including sex, marital status, parental status, disability, sexual orientation, age, gender reassignment or religious belief may be unlawful under the Faulty Act 2010. Subcontractors who are protected and feel that they have been discriminated against have the legal right to take their case before an employment tribunal.
Health and safety at work
Every person working for you has the right to work in an environment which meets government health and safety standards. This applies to both workers and self-employed staff, as employment status has no effect on these rights. Government health and safety standards address issues like ventilation, temperature, lighting, cleanliness, toilet facilities, sanitation, noise, vibration and equipment.
Of course, it is not your responsibility to provide a safe and healthy working environment for subcontractors who work remotely from home or from another location that is not directly associated with your organisation. Subcontractors working on site must be informed of health and safety procedures, told about their obligations and provided with safe and healthy working conditions. You also have a responsibility to report accidents, injuries and near misses which involve a self-employed subcontractor, as you would with any other employee or worker.
Considerations when hiring a subcontractor
Hiring subcontractors can bring additional skills and manpower to your workforce in a way that is more efficient and flexible than hiring more employees. To protect your business and the subcontractor you employ, it is important to establish the terms of the work they will complete in a written contract and agree it, before bringing them on board. Such a contract may include:
- Payment amounts and dates/milestones
- Details of who is responsible for supplying materials
- Clauses stating who is responsible in the event of unsatisfactory work
- Clauses stating how complaints must be dealt with
- A minimum notice period should you wish to terminate the contract
- Hours during which the subcontractor must be available
- Ultimately, establishing a contract of this nature should minimise problems, setbacks and confusion over responsibilities when working with a subcontractor. Keep in mind that any subcontractor rights detailed in a signed contract are just as legally valid as the right to protection from discrimination and the right to a safe working environment.
DavidsonMorris’ specialist team brings together experienced HR professionals and employment lawyers. We work with employers to support effective workforce management, including helping to determine individuals’ employment status and the organisation’s resulting employment responsibilities towards them. Through our fixed-fee employment law service, Triple A, employers can unlimited access to expert legal advice.
If you have a question or need guidance on employment status or employment rights, or to find out more about Triple A, contact us.
Subcontractor rights FAQs
What rights do I have as a subcontractor?
Subcontractors have very limited employment rights as they are self-employed. Subcontractors who believe a contractor or employer has breached the terms of their contract may be able to sue for damages.
Can a subcontractor be unfairly dismissed?
Only employees are protected from unfair dismissal and are allowed to bring unfair dismissal claims against their employer. Subcontractors should refer to the terms of their contract with their contractor to determine if there has been a breach of contract which can give rise to legal action.
Last updated: 19 September 2022