Construction, utilities and the self-employed workforce

According to a Report published by the Office for National Statistics (ONS) in 2014, self-employment in the UK is at its highest point for 40 years, with 4.6 million people who were self-employed in 2014. There were an additional 356,000 persons who had a second job in which they were self-employed. According to the Report, the top three job roles for the self-employed in 2014 were construction and building trades (167,000), taxi drivers (166,000) and carpenters and joiners (144,000), so the construction sector arguably has more self-employed than any other sector.

As from 1 October 2015, many self-employed became exempt from health and safety law as detailed in the Health and Safety at Work etc. Act 1974 (General Duties of Self-Employed Persons) (Prescribed Undertakings) Regulations 2015. In this feature article, Andrew Christodoulou outlines what these changes mean to those self-employed persons working in construction and takes a look at what is meant by being a self-employed person.

What is “self-employed”?

Defining what is meant by “self-employed” is a complex issue. By virtue of Section 53 of the Health and Safety at Work etc. Act 1974, the term means:

“an individual who works for gain or reward otherwise than under a contract of employment, whether or not he employs others”.

The term “contract of employment” has not been comprehensively defined either in legislation or case law and over the years Courts have developed various tests to determine whether someone is self-employed or employed. A contract of employment is also known as a “contract of service”, as opposed to a “contract for service” under which most contractors are appointed.

At one time, the difference between contract of service and contract for service was based on the ability of an employer to tell a worker how to do his or her work and was influenced by the term “servant”. Now the courts tend to use and give weight to numerous factors.

According to the HSE, relevant factors to consider in relation to a contract of employment may include the following.

• The degree of control exercised over the worker
• An employee is usually subject to significantly more control than an independent contractor.
• Whether the worker can properly be regarded as part of the employer's organisation
• A contractor is not usually integrated into the employer’s organisation.
• Whether the employer has the power to select and appoint the individuals doing the work
• The power to select and appoint workers is indicative of employment.
• Whether the employer has the power to dismiss or suspend the worker
• The power of dismissal or suspension indicates a relationship of employment.
• Whether wages/salary/holiday pay are paid
• These are indicators of employment.
• Supplier of equipment
• If one party to the contract in question supplies the tools, machines or equipment used by the other party, this points to a contract of employment.
• The person who fixes the times and place of work
• The power to fix hours and/or times when a person is to work is suggestive of a contract of employment.
• Whether personal service is provided
• A person will not normally be an employee if they are entitled to delegate the entire performance of the work to another person.
• The extent of the obligation to work and mutual obligations
• If the contract entitles a person to the full-time services of another, this indicates a contract of employment.
• Payment of income tax and National Insurance contributions
• Where the employer deducts income tax and social security contributions under the PAYE system, this indicates that the parties themselves view their relationship as one of employment.
• The intention of the parties
• The intention of the parties as to the contract that they intend to create is a relevant factor to consider.

According to HMRC:

”You are probably self-employed if you:

• run your business for yourself and take responsibility for its success or failure;
• have several customers at the same time;
• can decide how, where and when you do your work;
• can hire other people at your own expense to help you or to do the work for you;
• provide the main items of equipment to do your work;
• are responsible for finishing any unsatisfactory work in your own time;
• charge an agreed fixed price for your work sell goods or services to make a profit (including through websites or apps).”

HMRC have also developed an Employment Status Indicator on its website to help people decide on their employment status.

What constitutes self-employment for health and safety purposes may differ from that for tax purposes. In a Parliamentary Briefing Paper (Number 000196, 8 July 2015 Self-employment in the Construction Industry) the paper refers to “the scale of false self-employment” in the construction sector. This refers to individuals taken on the basis that they are self-employed, but are actually working under employment terms. There may be advantages for employers classifying workers this way, for example they may avoid being charged National Insurance contributions on the earnings they pay. There may also be advantages for individuals who may make an income tax saving.

In summary, what is a self-employed person is dependant on a number of factors which have to be carefully considered. In In summary, what is a self-employed person is dependant on a number of factors which have to be carefully considered. In Market Investigations v Minister of Social Security (1969), Cooke J said on this issue (1969), Cooke J said on this issue:

“the fundamental test to be applied is this: ‘is the person who is engaged himself to perform these services performing as a person in business on his own account?’”

Perhaps this statement is good starting point on deciding self-employment versus employment?

Exemptions from Health and Safety for the Self-employed

The Health and Safety at Work etc. Act 1974 (General Duties of Self-Employed Persons) (Prescribed Undertakings) Regulations 2015 came into force on 1 October 2015 and say that health and safety law will only apply to the self-employed if:

• the work activity in question is listed in the Schedule to the Regulations, or
• the work activity is not listed but poses a risk to the health and safety of others (not including the self-employed person or their employees).

The following work activities are listed in the Schedule.

• Agricultural activities, including forestry
• Work with asbestos
• Construction work, ie work on a construction site and also work subject to CDM 2015, including work carried out by a designer, principal contractor, or principal designer
• Gas work, ie subject to the Gas Safety (Installation and Use) Regulations 1998
• Work with genetically modified organisms as defined in the Genetically Modified Organisms (Contained Use) Regulations 2014
• Railway work as defined in the Health and Safety (Enforcing Authority for Railways and Other Guided Transport Systems) Regulations 2006

Consequently, those self-employed persons working in construction will not be exempt from health and safety legal requirements. Those self-employed not involved in activities listed in the Schedule will have to be able to justify whether or not their work poses a risk to others, and this can only be achieved by considering the risks associated with the work and by performing assessment of those risks.

HSE estimates that health and safety law will no longer apply to 1.7 million self-employed people such as novelists, journalists, graphic designers, accountants, financial advisors and dressmakers.

Conclusions

The new requirements, as contained in the Health and Safety at Work etc. Act 1974 (General Duties of Self-Employed Persons) (Prescribed Undertakings) Regulations 2015, will have limited or no effect for those working in construction. What remains, though, is the age-old issue of those in the construction industry who consider themselves as self-employed but are actually employed in the eyes of the law. The issue of what a Parliamentary Briefing Paper has called the ”false self-employed” will no doubt continue.

Further reading

1. Self-employed workers in the UK — 2014 Office for National Statistics, www.ons.gov.uk/ons/rel/lmac/self-employed-workers-in-the-uk/2014
2. Working for yourself — HMRC, www.gov.uk/working-for-yourself/what-counts-as-selfemployed
3. Self-employment in the construction industry — Antony Seely, House of Commons Library Briefing Paper 000196 8 July 2015
4. What is a contract of employment? — HSE, ww.hse.gov.uk/enforce/enforcementguide/investigation/status-contract

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