Employee or Contractor

Guidance note 9 to the EMPLOYMENT (JERSEY) LAW 2003 

The use of "self-employed contractors" by organisations. 

These guidance notes are intended to assist in understanding the difference between employees and independent contractors under the Employment (Jersey) Law 2003.It is not intended to cover all the requirements of the Law, nor does it represent a statement of the Law. Any reference to male persons in the statement should be read as including, or being, female persons where this is appropriate.

For a variety of reasons some employers use self-employed contractors to undertake tasks such as project management, accounts preparation or data processing. Sometimes contractors are used simply to provide additional resources to meet a temporary skills shortage.

What are the perceived benefits of using contractors?

• The normal terms and conditions package that the employer may make available to their permanent staff need not be provided to the contractor e.g. paid holidays, health insurance, sick pay.
• Specialist skills can be quickly acquired for as long or short a period as they are needed
• The contractor may be exempt from "head count" restrictions that would otherwise be imposed on the business.
• As a self-employed person, the contractor is responsible for his own Social Security contributions.  
• The hours of work or out of hours payments negotiated with the contractor can be different than would normally apply to permanent staff.

Will the new Employment Law alter this position?

Yes it will, in the majority of cases. While it will still be possible to contract for service from a genuine contractor on a different basis than permanent staff, it will be more difficult to demonstrate that the contractor is not, in fact, an employee with all the associated employment rights.

How do we know who is a contractor and who is an employee under the new law?

For guidance we have to look to the definition of "employer" and "employee" within the Law: 

An "employer" means a person who employs another person, and

An "employee" means:

 (a) A person who is employed by another person, if the first person works for the second person under a contract of service or apprenticeship with the second person, or

 (b)  Subject to Article 36 (which deals with home-workers), a person is also employed by another person if the first person enters into any other contract with the second person under which the first person undertakes to do, or to perform personally, work or services for the second person and the status of the second person is not that of a client or customer of any profession or trade or business undertaking carried on by the first person.

 It is immaterial whether the contract referred to in (a) or (b) above is express or implied or whether it is oral or in writing.

The definition in (a) is that which applies to the majority of people employed as permanent or fixed term contract staff.

The definition in (b) is broadly comparable with the UK definition of "worker". A worker in the UK has more limited rights than an employee. In Jersey both categories will enjoy the same rights as they are both "employed" as far as the new Law is concerned. Because those contractors covered by (b) are actually employees, they will be entitled to have:

• a written statement of their employment terms within 4 weeks of commencement;
• a detailed pay statement at regular intervals;
• two weeks’ minimum paid holiday entitlement, paid time off (or an alternate day off in lieu with pay) on any bank or public holiday on which they were due to work;
• a rest period of not less than 24 hours in each 7 day period or, by agreement, two such periods in each 14 days;
• protection from unfair dismissal.  
• If a business believes that it still wishes to use contractors, then it would be sensible to carefully examine its requirements and decide:
• are there any existing contractors who it would be better to treat as employees?
• whether it wants certain contractors to remain self-employed and for what reason?
• what contractual arrangements are already in place for contractors and whether any alterations to working practices or contract conditions are necessary to make certain that the Law will not treat them as employees?

If we feel that we need to engage self-employed contractors, what do we need to consider?

It is a complex area of employment law and taking legal advice would best protect an employer’s interests. For general information, however, you should consider the "four tests" that have been built up over many years by UK case law:

•  "Control" – whether the contractor has a duty to obey orders; whether he has discretion over his hours of work; whether he is supervised by the "customer".
  The greater the "control", the more probable is it that the person is an employee.
• "Integration" – the degree to which the person is employed as part of the business and his work is integral to the business, rather than an accessory to it.
• The greater the "integration", the more probable is it that the person is an employee.
• "Economic reality" - the facts as to how the person is paid; whether they are free to hire others to do the work; whether they invest in their own business and provide their own equipment; the way in which Social Security payments are managed.
• If, in reality, the person is contracted to do the work himself, rather than being free to hire in others to do it; if he uses the organisation’s equipment and is paid a regular "wage", the more probable is it that the person is an employee.
• "Mutuality of obligation" – what is the duration of and regularity of employment; is there an obligation to provide work to the individual and is he obliged to accept the work offered?

If an individual works for a large number of employers or clients during the course of a year they are more likely to be regarded as self-employed. If they work for one organisation for a substantial period of time, they are more likely to be regarded as employees