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The decision of the Employment Tribunal that Uber drivers are entitled to the protections afforded under the Employment Rights Act is interesting but don’t be misled into thinking that it has any tax implications. For, despite what you might think from what you read in the press, the Employment Tribunal did not find that the drivers were employees: it merely found that they had rights under the Employment Rights Act 1996 and associated legislation.
The point is that the rights in question are afforded to “workers”: and the term “worker” encompasses two categories of person. The first is someone engaged under a contract of employment (that is, an employee); the second is someone engaged under a contract whereby he or she “undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual” – a so-called “limb (b) contract”. Understandably, the courts have puzzled over what exactly is covered by a “limb (b) contract” and have concluded that it covers, broadly, people who are in law self-employed but whose degree of dependence upon the work-provider is essentially the same as that of an employee and who are therefore deserving of the same protections as employees.
The question before the Tribunal was therefore not whether the claimants were employees, but whether they were “workers” within the extended definition. The Tribunal expressly found that they were not employees but “limb (b) workers”. The significance for tax purposes is of course that although such workers do have employment rights, payments made to them are not subject to PAYE and NIC obligations.
Cases of this kind are almost always fact-dependent but unless the case is reversed on appeal businesses engaging workers on the terms of the Uber claimants will find themselves obliged to afford employment rights such as the minimum wage and holiday pay, but they will not suffer the additional cost of having to treat the workers as employees for tax purposes. In summary even where a particular group of people can be confirmed as not your employees, they may nonetheless have rights under employment legislation.
Senior Partner, Simmons Gainsford
All views are the authors own and do not represent those of Simmons Gainsford Group.
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