Bringing clarity to the freelance landscape

Employment status issues are key to understanding freelancing and also to how it has been misunderstood in the UK and elsewhere. The UK’s common law, which governs employment status, has become unfortunately confused in recent years. Tax expert Anne Redston offered an overview of these developments following the judgment in Cable and Wireless v Muscat. PCG is working to secure clarification in this vitally important area. The landscape has changed slightly again following the judgment in James v. Greenwich Council (2008).

Employment and commercial relationships

The International Labour Organisation issued a Recommendation in 2006 that employment law should not interfere with commercial relationships: PCG welcomed this development and urges both the UK Government and the European Commission to follow the ILO’s example of taking a straightforward and common-sense approach in distinguishing between employment and commercial relationships. 

There are two basic types of working relationship: an employment relationship; and a commercial relationship. Freelancers use the latter: they are paid to provide services on a commercial basis, under a “contract for services”; they do not enter into employment relationships or work using “contracts of service”.

PCG’s biggest policy demand in this area is that the law governing employment status is clarified. These issues were debated in the House of Commons in December 2006, and in the House of Lords in April 2008. 

Disguised employment

Some companies attempt to hire workers to work as employees, but using commercial contracts: this creates a “disguised employment” relationship in which the end-user can both control and dismiss the worker easily, while the worker has no protections or freedoms. PCG opposes the use of disguised employment relationships: it urges companies not to use them and would like the law to be clarified so that they are not possible.

With this achieved, there will be no further suspicion that freelancing is not a legitimate business model. Such suspicion has in the past led to measures such as IR35.

Legal uncertainty in the UK

The courts have begun to act against disguised employment and pin employment obligations on end-users in such instances. However, the nature of the common law means that exactly how this logic applies in any given real-life situation is unclear. This lack of clarity is causing companies to hesitate when engaging freelancers, thus pushing up costs and undermining the competitive advantage offered by the UK’s uniquely sophisticated freelancing model. PCG advocates the clarification of the law by statute as a matter of urgency.

All-Party Group

In 2008, a new group of MPs was established: the All-Party Parliamentary Group for the Freelance Sector, which is chaired by former DTI  minister Nigel Griffiths MP, assisted by Mark Prisk MP and Lembit Opik MP as vice-chairmen, Brian Jenkins MP as secretary and Janet Anderson MP as Treasurer. PCG submitted evidence to its first enquiry.

PCG Policy Overview: Employment Status

PCG Position Paper: Employment Status

Advice for clients on engaging freelancers, contractors and consultants