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.
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 employees does not be provided to the contractor;
- Specialist skills can be quickly acquired for as long or short a period as they are needed;
- As a self-employed person, the contractor is responsible for their own Social Security and ITIS contributions.
- The hours of work or out of hours payments negotiated with the contractor can be different than would normally apply to permanent staff.
How do we know who is a contractor and who is an employee under the law?
For guidance we have to look to the definition of "employer" and "employee" within the Law:
An "employer" is a person who employs another person, and
An "employee" is:
(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) applies to the majority of people employed either permanently or under a fixed term contract.
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 they are not treat them as employees?
Things to consider when engaging contractors:
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 they have discretion over their hours of work; whether they are 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 their 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" - how the person is paid; are they free to hire others to do the work; dothey invest in their own business and provide their own equipment; the way in which Social Security and ITIS payments are managed. If, in reality, the person is contracted to do the work themself, rather than being free to hire in others to do it; if they use 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 are they 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 maybe likely to be regarded as employees.