Zeeshan Anwar, Head of Compliance at Dolan Accountancy reveals the rights that freelance workers have in the UK, alongside warning companies using self-employed workers about classifying freelance workers from company employees.
The freelance workforce is rapidly on the rise with around 4.3 million self-employed workers in the UK.
While freelancing offers flexibility and autonomy, it’s important for both freelancers and employers to understand the employment rights that freelancers are entitled to under UK law.
According to a recent study, only 30% of companies are aware of employee and independent contractor misclassification risks.
Your employment status affects your legal protection at work and impacts what employment rights you’re entitled to. If you’ve recently made the move to freelance or contract work, you might be wondering how your employment rights have been affected.
What is a freelancer?
From a legal and taxation perspective it’s important to understand what freelancers are. Freelancers are defined as self-employed individuals and are solely responsible for setting their own working hours and pricing rates. Freelancers are responsible for declaring their income and paying their own tax and National Insurance contributions on an annual basis – failure to pay the correct amount of tax can result in severe fines.
Contractors are often self-employed but can have a worker’s employment status. Or, if they work for a client and are employed by an agency, they’ll have the employment status of an employee.
Your rights as a freelancer
Freelancers work as their own bosses and so aren’t covered by employment law in most cases. This means that things like sick pay and legal protection under company schemes don’t apply to freelancers.
Despite this, you have legal rights at work, whether you’re an employee, worker, freelancer or contractor. These rights include:
- Health and safety protection
- Protection against discrimination in the workplace
- Being legally protected by the terms of the contract with your client
- The right to a safe working environment
What employment rights are freelancers not entitled to?
With all the benefits of being self-employed, it’s important to understand that certain employee benefits will no longer apply, including the following:
Statutory Sick Pay (SSP) is paid by an employer when an employee is unable to work due to illness. If you work for yourself, you don’t have an employer so you can’t claim sick pay.
However, if you find yourself unable to work due to sickness whilst being self-employed, you may qualify for the ‘new style’ Employment and Support Allowance (ESA). This depends on whether you’ve made enough national insurance contributions in the last two to three years.
Those who are self-employed don’t have any right to annual leave. However, depending on the nature of your work/contract, you may be given annual leave. For example, if you work via an agency or umbrella company as a contractor, you could be given an annual leave allowance based on the length of your contract.
Those self-employed workers who aren’t entitled to annual leave can still take holidays whenever they wish but they won’t be paid for the days they aren’t working.
Statutory Maternity Pay (SMP), Statutory Adoption Leave and Statutory Paternity Pay are all paid by employers, so self-employed workers aren’t entitled to any of these benefits.
However, self-employed women who are unable to work after having a baby may qualify for Maternity Allowance (MA). You can access this allowance for a total of 39 weeks if in the 66 weeks before your baby’s due you’ve:
- Been self-employed for at least 26 weeks
- Been earning at least £30 a week
When you’re self-employed, you work as your own employer. This means you set your own wages and aren’t entitled to the National Minimum Wage. You might have your own personal rules of the minimum pay you’d accept from a client but you aren’t entitled to a minimum amount. It’s up to the client what they pay you and it’s up to you whether you accept.
Working time rights
The Working Time Regulations set a limit on the number of hours an employee can work in a week and what breaks they are entitled to within those hours. As a self-employed worker, you set your own working hours and so are exempt from any working time rights.
What do companies need to be aware of?
For companies hiring freelancers, misclassifying employees as freelancers can result in the company being held responsible for any unpaid tax. Misclassification occurs when a contractor is treated as self-employed but works under conditions similar to those of a permanent employee. This can happen accidentally, but it can also be due to ignorance or unfair intent on the part of the employer.
Being misclassified as an independent contractor has ramifications for your employment status, as well as your tax payments and National Insurance contributions. Not only can this have financial implications for businesses, but failure to correctly pay employees can also significantly damage a company’s reputation.