Employment law can be a minefield for businesses in terms of employee safeguarding, contracts and other areas of staff welfare.
Making sure your business is compliant in these important areas of law is crucial to business reputation and to avoid costly disputes. And this applies to our local area of Cardiff and South Wales just as much as any other part of the country.
So it’s not surprising that many businesses and contractors need to make sure they understand their obligations in a working relationship.
But does employment law apply to contractors?
In our helpful but simple guide, we’ll give you the definitive answer to protect freelancers, contractors, and the businesses they work for.
Let’s first start with the short answer before we head into a little more detail.
Employment rights are not applicable in the relationship between a contractor and the company they work for, as this is governed by contract law. Contractors working with an umbrella company are, however, protected by employment law.
Ok with the short answer in mind, to help understand a little more easily as to whether employment law applies to contractors, let’s begin by finding out what a contractor is.
What is a contractor?
A contractor is self-employed and works independently. Whether in Cardiff, South Wales, or any other part of the UK.
If you perform contract work you may be referred to …or refer to yourself as a freelancer, consultant or similar title representative of your profession.
A contractor usually has a specialist skill which is required for a limited time. This is just why businesses generally hire such workers, as long term, that skill isn’t required on a full-time basis.
A contractor will usually work for a specific length of time on a project. As a freelancer or contractor, it’s likely they will work alongside full-time employees.
“A contractor usually has a specialist skill which is required for a limited time”
Long-standing contractor relationships
In general, the relationship between contractors and employers is generally straightforward, but there can be times when companies and contractors need to define their agreements.
As specialists in UK employment law, we often find that these types of problems more likely occur with long-standing contractor/business partnerships. However, they can happen at any time.
It could mean any contract drawn up between both parties is no longer valid and could see a breach of employer or contractors obligations.
So if you are a contractor and are wondering if employment laws refer to you, or a business hiring contractors, then it’s helpful to discover more about the differences between a contractor and an employee.
Difference between a contractor and an employee
If you have found yourself in a workplace situation as a contractor it’s worth understanding that there are three main ways in U.K. law that contractors and employees differ.
| Contractor | Employee | |
| Mutuality of obligation | If you are a freelancer or contractor, a business is not required to offer you work, and in turn, you don’t have to accept any offers of work | An employed member of a company is required to be offered work by their employers and in return accepts that offer |
| Control | A self-employed freelancer or contractor can choose their own hours, decide how long they work, and set a schedule of work over their daily, weekly or monthly output | Employees, in general, have set hours, days, and other parameters within which they agree to complete work |
| Substitution | Any hired freelancer or contractor can subcontract a third party or their own employees to carry out work | An employed member of a business must complete work themselves |
So from our helpful table, we can see quite clearly how businesses and freelancers’ obligations differ from fully employed members of staff.
Does employment law cover contractors with umbrella companies?
So as we saw in the quick takeaway, employment law isn’t applicable with a standard contractor or freelancer arrangements with businesses.
However, those contractors working for umbrella companies are able to be protected by employment law.
Let’s find out more about what an umbrella company is:
What is an umbrella company?
Relationships between an individual contractor and their umbrella solutions provider differ from usual contractor partnerships as your relationship is with the company rather than the business you are completing work for.
Some contractors prefer to use umbrella companies as there is no need to submit a tax return along with other benefits of employment such as enrollment onto a pension scheme, maternity pay, and other benefits.
As a contractor, when you begin a relationship with an Umbrella company, you will be required to sign a contract between yourself and the company in the same way as an employee.
Relationship between contractor and umbrella company
Umbrella companies employ contractors and freelancers to undertake work for various businesses and clients.
In the contract, there will be specific terms and other agreements where the contractor agrees to work and get paid.
They also hold back a portion of the income earned by the contractor to cover usual employee benefits such as holiday pay and sometimes contractor’s insurance.
The umbrella company then has a business relationship with agencies and clients, where any disputes will be handled by the umbrella company under contract law.
“When you begin a relationship with an Umbrella company, you will be required to sign a contract between yourself and the company in the same way as an employee.”
As we discovered earlier in the brief answer, contract law is how any disputes are solved between contractors and any company they carry out work for.
So let’s find out more about contract law to help us understand why it applies to contractors rather than fully employed members of staff.
Contract law and how it differs from employment law
In a nutshell, contract law refers to the ‘contract’ between the freelancer, contractor, or agency and the business they are providing skills for.
A contract can relate to many types of everyday activity such as buying a house or signing a lease for a car.
Essentially a contract is a legally enforceable agreement upon which both parties subject to the contract have legal responsibilities.
Employment law is specifically to protect full-time members of staff. This includes workers’ rights, welfare, pay, and other aspects of working as an employee of a company.
For example, fully employed members of staff should receive a written statement on the first day of employment which forms the agreement of an employee to work for the company, and the company to provide payment. It’s worth noting that there is still a contract, regardless of whether anything is given in writing.
“contract law refers to the ‘contract’ between the freelancer, contractor or agency and the business they are providing skills for.”
And finally…
We hope that has helped anyone wondering if employment law relates to contractors and given some insight into the laws governing contractors and employees relationships.
Here at Robinsons Solicitors, we understand the difficulties you might be facing with disputes in the workplace. Especially when it comes to continuing your daily working life. We can offer you an expert solution and help you make the transition to legal measures.
For a confidential chat on meeting your legal obligations in and around Cardiff, or South Wales, or if you need urgent advice, do get in touch with our friendly expert team.
