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Each Contractor according to whether he/she would have been an employee were
they engaged directly by the client. The Inland Revenue have an
advice line but will only give their interpretation based on a signed contract,
so if your contract does not comply it will be too late!
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The terms and conditions of the relevant contract which will usually reflect
what would have applied had the worker been engaged directly by the client.
Read through the contracts offered to you after April 6, 2000 and get advice
before you sign or commit to anything. We recommend that you become
conversant with all these criteria and compare the wording of the contract to
see if it complies with legislation.
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Whether the contractor has other clients and a business organisation. The
Inland Revenue are looking at the number and variety of clients worked for
during each year together with other factors e.g. staff, office premises and
methods of acquiring new contracts with clients.
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Whether the client has a right to exercise "control" over the Contractor.
A true consultant is hired in to a business with a guideline or brief and would
then control his/her own methods, reporting to the management team that hired
him/her.
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Whether the client can determine what work is carried out. Again, a true
consultant with a guideline would produce a report based on his/her findings,
having used whatever methods he/she thought relevant - it is, after all, what
they were hired for.
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Whether the Contractor has a right to supply a substitute for that particular
contract. If the job requires to be done then companies would be invited
to tender for it, and on acceptance, any person from that company could be
despatched to the client's premises to carry out that job. It is possible
for there to be a number of personnel with the necessary skills capable of
carrying that job for the client.
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Whether the Contractor is able to work exclusively at home using his/her own
computer equipment or whether he/she is provided with office space at the
client's premises. If the entire contract must be performed at the
client's premises using their computer equipment and support, then this would be
seen to be a weakening factor.
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Whether the Contractor risks his/her own money e.g. by buying asset[s] needed
for a job and bearing the running costs, paying for overheads and/or materials.
The purchase of asset[s], e.g. laptop computer, which may or may not get used
for any one contract shows a degree of risk and strengthens the case, but alone
does not guarantee compliance with legislation.
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Whether the Contractor tenders or quotes a fixed price for a contract and
whether there is a consequent risk of bearing the additional costs if the job
overruns, e.g. requiring additional personnel or hours to complete by a
deadline. In normal commercial circumstances, companies would be invited
to tender for a contract and the one with the best value or price would be
engaged. The contracted price would be fixed and any unforeseen problems
that occurred would cause the Contractor to be less profitable on that contract.
Only negotiated for incidents may permit extra payments by the client.
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The frequency of payment and whether additional payments such as overtime, long
service bonus or profit share are available. Independent contractors tend
to be paid a fixed sum for a particular contract although it is possible to have
stage payments. Where a contract is of a fixed price, it suggests a
performance by the Contractor which would not usually revolve around a
guaranteed number of hours at a predetermined rate of pay.
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Whether the Contractor becomes "part & parcel" of a client's organisation.
If, having accepted a contract, the Contractor occupies at the client's
premises, office space, uses equipment and all the support functions as an
employee, it will weaken his/her case.
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Whether a right to terminate an engagement exists, by giving notice of a
specified length or is it done on completion of the contract or if the terms of
the contract are breached. Standard practice with commercial contracts is
for a performance of that contract to be evaluated on its completion and for the
client to decide whether that contract has been performed according to the terms
and conditions or whether there has in fact been a breach of them. This would
then affect payment in full or whether there is some deduction, retention, or
remedial work.
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Whether there is an entitlement to sick pay, holiday pay, pension contributions,
expenses etc. A true independent consultant would not be entitled to any
of these.
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The length of periods worked for any one client, whether by a series of short
contracts, or an initial short contract subsequently extended for a longer
period. Don't think that a short contract followed by another separate one
at the same client will help!
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The intention of the relationship between the client and the Contractor, to be
one of a self-employed status. This will be implied or expressed
within the terms and conditions of the contract.
