Shiva Shadi – Head of Employment – asks: “Employee or Consultant?”

Organisations have to consider certain issues when deciding whether to take on an individual as a self-employed consultant or an employee. Most take on individuals as employees without giving it a second thought, even though  Consultancy Agreements can form a more commercial and flexible relationship than a Contract of Employment.

Consultants can bring expertise to an organisation which doesn’t exist in-house whether on a short term basis or for projects that are to be carried out over an extended period of time. Additionally as self-employed experts, consultants will not need to be trained as they should be the “finished article” saving organisations valuable time and money.

Organisations can stipulate specific tasks or services that are to be provided within a structure to suit them and their commercial needs.

Organisations engaging consultants will also be free from statutory obligations and liabilities that are embedded in employment law legislation. However, you will not have the same control or be able to assert the same authority as you would otherwise with an employee.

By way of example, consultants cannot be subject to an organisation’s disciplinary policies and procedures, nor annual leave and sickness absences polices. The stricter of the control that the organisation has over a consultant the more likely they may actually be held to be an employee.

Consultants themselves, whilst not being able to benefit from any statutory protections which an employment status brings with it, together with uncertainty in terms of future earnings and the burden of needing their own insurance, often favour the more favourable tax treatment that self-employment brings. They will also have greater flexibility in the way they work including the ability to work for several organisations at any one time.

Although consultants will not be able to pursue unfair dismissal claims they will still have protection under the Equality Act 2010 in terms of discrimination.

Given that the relationship between an organisation and a consultant needs to be specific so as to ensure it falls outside the status of an “employee”, it is vital that the Consultancy Agreement between the parties is carefully drafted and include key clauses including specifying: –

  • Consultant’s duties;
  • Who will be responsible for any tax payable;
  • Whether the consultant will supply his or her own equipment and materials;
  • Whether they will need insurance;
  • Indemnities in case the consultant fails to provide the services under the contract; and
  • Whether the consultant can send a substitute to provide the service instead.

If you require additional information in relation to Consultancy Agreements, please contact the Employment Team at Davis Blank Furniss on 0161 832 3304.

For more information about Shiva and her work, please visit https://www.dbf-law.co.uk/our-people/Shiva-Shadi/.

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