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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
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Status: Determining the status of worker

When it is not clear whether a worker’s contract exists between an employer and an individual it is necessary to investigate the arrangements between the parties. There is no definitive list of factors to consider when investigating the status of a worker. The issues will vary from case to case but some areas that might be relevant when determining status include:

  • the degree of control exercised by the employer about what work is to be done, where, how and when,
  • the amount and manner of payment,
  • who risks the financial loss and has the ability to increase the profits,
  • who provides the tools and equipment,
  • whether the worker is tied to an employer or allowed to work for others, particularly rivals (and whether they do so),
  • whether the worker is required to provide their personal service or whether they can supply a substitute (and whether they do so),
  • whether there is a traditional structure of employment or self-employment in the trade (even where there is a tradition in a certain occupations of employment/self-employment it is still necessary to investigate and consider each case on its own merits),
  • how the parties themselves see the relationship, what was the original intention of the arrangement,
  • how tax and national insurance is paid,
  • how the arrangements will be terminated,
  • is there an agreement to the number of hours to be worked,
  • the arrangements in place regarding the entitlement to breaks, time off and holidays.
  • does the arrangement have the presence of mutuality of obligation? Are both parties committed to doing something for the other? At its simplest this may mean that one party agrees to work for the other and the other party agrees to pay for that work. There may be no mutuality of obligation if one party is not obliged to offer work or if the other party is not obliged to accept that work. However, where work is offered and accepted there may be sufficient mutuality of obligation for the duration of that individual contract or assignment

When determining the status of a person, there is no one single factor that is sufficient to determine whether they should be treated as a worker for national minimum wage purposes. Nor is it a question of simply counting up a range of attributes, but rather it is a question of assessing the position as a whole. It also needs to be considered that the tests should be applied to the real relationship and not necessarily what the parties have agreed verbally or in writing.

Only in those cases where it is considered that there is an employer/worker relationship will entitlement to national minimum wage arise.