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 out 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.
