Appendix 15 - Employed or Self Employed Status Guidance
Employed or Self Employed Tests
There is no single question which can be asked to determine whether an individual is employed
or self-employed. Being self employed in one job does not mean that they are automatically
self-employed in every other job they take on. Each contract must be treated separately. There
are sets of multiple questions that are used by the legal profession and the Inland Revenue. It is
the overall contractual position established by the answers to all the questions, which is the key
determining factor. Some of the most important tests are:
Does the person get told what to do, when to do it and how to do the job.
A self-employed consultant or contractor will be given a brief or specification which includes the
above, but where the work they do is controlled, directed or supervised on a regular basis they
could be considered to be an employee.
Is the person part and parcel of the business i.e. are they integrated. Examples here could be
are they on mailing list, do they attend training courses or section meetings. If there is no
difference between this person and an employee, they are likely to be an employee themselves.
This is one of the clearest legal tests used to determine employed or self-employed status.
A self employed person will be more likely to incur or make provision for financial
responsibilities. For example by borrowing in the business, or by insuring related risks
A self-employed consultant or contractor will be paid a fee for the job and will present invoices
at agreed intervals. They will also be responsible for meeting any losses and making good any
mistakes. Unless it is agreed as part of the rate for the job they will provide all their own
equipment including computers, telephones and stationery.
Any person being paid by the hour, week or month or who always uses County Council
equipment etc. is likely to be an employee.
Engaging (especially concurrently) with a number of different clients is characteristic of self
Sole consultants or contractors who have just set up in business must complete the Inland
Revenue Questionnaire (Appendix two) and be paid through the payroll.
Personally Provide the Service
Does the person have to perform the task personally or can they hire a substitute?
Normally if the person does the work himself or herself it would indicate that they are an
employee, but this does not automatically follow for sole consultants or contractors.
If the person runs their own business and is a specialist in that particular business, they are
more likely to be a self-employed consultant or contractor.
Volume of Work (Mutual Obligation)
If the person does not have a continuous job or the guarantee of continuing work, regular or
irregular work, they are more likely to be a self-employed consultant or contractor i.e. no mutual
obligation to the provision of work.
Entitlement to Employees Rights
If an individual has provision for entitlement to payment for holidays, sickness or pension, he or
she will almost certainly be regarded by the Inland Revenue as an employee.
The above list is not intended to be exhaustive, but these are some of the more important
features which are used in arriving at a determination of employed / self-employed status
So far as taxation is concerned, the principles discussed above as to deciding employment
status do not create a problem for the Council in relation to genuine engagements entered into
with a limited company, (even if such a concern is essentially a 'one-man or woman company').
Genuine arrangements mean those where:
1. A company (i.e. a separate legal personality), truly exists (this should be checked by for
example getting a copy of the letterhead and checking the company registration number:
many sole traders use the term colloquially).
2. The relevant contract is between the Council and the company.
3. All cheques for remuneration under the contract are made payable to the company.
Under provisions enacted in the Finance Act 2000, the Revenue can enquire more deeply into
such arrangements, but the onus here lies with the engaged company, not with the Council. Our
responsibility is limited to ensuring that the details of any contract entered into are reasonably
borne out by the facts. The Revenue may seek factual information about the operation of the
contract from the Council, but should obtain the consent of the owner of the company before
doing so. You should satisfy yourself that written consent exists before offering such co-