The off-payroll working (OPW) rules continue a policy which started with the so-called IR35 regime. The aim in each case is that those who would be employees, if it wasn’t for the presence of an intermediary (usually a personal service company), pay broadly the same income tax and national insurance as employees.
The scope of the OPW rules was extended to cover both public and private sector workers from 6 April 2021. The change means responsibility for deciding the employment status of workers, who provide services through an intermediary, moves from the worker to the client. This applies where the client is classed as medium or large according to criteria in the small companies’ regime. Where an engagement is within the OPW rules, the fee-payer must deduct income tax and national insurance, paying these to HMRC.
A glance at the many employment status cases coming to court is enough to show the difficulties of making an accurate status determination. The right of substitution is often thought of as key in defining status. Can a worker send someone else to do the work for them (the right of substitution), or must they carry it out themselves? An unfettered right of substitution may indicate that someone is not an employee. On the other hand, the requirement to perform work in person – personal service – can point towards an employment relationship.
This was an area examined in a recent case at the Court of Appeal, which involved a moped delivery courier who worked for Stuart Delivery Ltd. The question was whether he was a worker, as defined under the Employment Rights Act, with the employment rights such status brings.
Stuart Delivery argued the courier was not a worker, because of his right of substitution. The Court, however, decided that he had only a conditional right of substitution, and that the requirement for personal service predominated. Though couriers were allowed to turn shifts down, they could only release them to Stuart Delivery’s other drivers. The organisation’s business model was based on couriers being obliged to perform work personally, with guaranteed minimum hourly payments and delivery awards that hinged on them taking up delivery slots.
The verdict is a reminder of the need to look at all aspects of a working arrangement when making a status determination. A single factor, such as the right to provide a substitute, may be insufficient to keep a worker outside the rules. Checking whether the contractor is in business on their own account, and how, practically, they mesh with your business, make good starting points.