A matrix to solve employment status confusion

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Jordan Marshall
IPSE
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Jordan Marshall, IPSE policy development manager, examines the problems around defining employment status and outlines how his organisation hopes to tackle this with their ‘self-employment matrix’.

Determining what does (and does not) constitute self-employment is a contentious issue, with employment tribunals now a regular occurrence. And at IPSE, the Association of Independent Professionals and the Self-Employed, we see this as a problem. We would prefer to see more certainty for individuals and hirers with far fewer cases being in resolved in costly, time-consuming court cases. With IR35 changes wreaking havoc in the public sector since April 2017, IPSE sets out to assuage this problem.    

That is why, as part of our response to last year’s Taylor Review of modern working practices, we have designed a ‘self-employment matrix’. The logic being that all parties will be better off for having greater clarity over what self-employment looks like.

For individuals, it will help prevent exploitation and better enable individuals who want to be self-employed understand what steps they need to take to ensure they are genuinely in business on their own account. At the same time, companies require certainty about how they should manage their engagements with people they wish to work with on a self-employed basis.

Exploring working practices in detail, our matrix is grouped into four categories to reflect the reality of self-employment:

  • Autonomy
  • Control of process and working environment
  • Business risk
  • Level of integration in client business

Based on case law and our assessment of what genuine self-employment looks like, there are a number of factors within each category that tease out whether the contract and the working practices underpinning it should be considered self-employment.

Each factor is weighted to reflect how strong a pointer it is towards genuine self-employment. The scores for each factor are added together to give a final score. This will result in one of four conclusions: self-employed, not self-employed, likely to be self-employed or unlikely to be self-employed.

Autonomy

This is about how much power the self-employed individual genuinely has within the relationship. Is their client obliged to provide work and are they obliged to do it? Do they have the unfettered right to provide a substitute and have they indeed used a substitute? Are they able to work with other clients?

  • Lack of Mutuality of Obligation (MOO) (10 points)
  • Right substitution (5 points)
  • Use of a substitute (10 points)
  • Lack of exclusivity (5 points)

Control of process and working environment

On a day-to-day basis, who is in control? Is your client able to change what tasks you are working on and how it is done? Do you have a say about the hours you work?

  • Control of tasks (15)
  • Control of method (10)
  • Control of hours (5)

Business risk

Are you genuinely running a business, taking into account the risks that entails? Do you have to seek new work? Are you paid on a project by project basis? Do you regularly set or negotiate your own rate of pay?

  • Pay per job/task (10)
  • Two or more clients (5)
  • Entrepreneurial activity (5)
  • Rate of pay (5)

Level of integration in client business

Do you represent yourself or your client in the course of doing your work? Are you forced to wear a uniform? Do you use your own equipment and tools?

  • Representation (5)
  • Equipment and tools (5)

Scoring and next steps

  • 65+ = Self-employed
  • 50-64 = Likely to be self-employed
  • 35-49 = Unlikely to be self-employed
  • <36 = Not self-employed

It is unlikely that any engagement is likely to meet all of these criteria, but the genuinely self-employed will meet most. IPSE believes that the autonomy an individual possesses and how much control they exhibit on a day-to-day basis is absolutely central to being self-employed.

That is why these categories are heavily weighted in our matrix. The taking of business risk and the extent to which you are integrated into a client’s business are important too, but in our view do not get to the heart of what being self-employed really means to the same extent.

IPSE hopes that our matrix is made available and signposted by government as a resource for the self-employed and those who wish to engage with the self-employed. It enables individuals and organisations to quickly understand where they stand; and for engagements that fall into the “grey area”, it will be immediately clear which factors either the individual or client will need to change in order for the engagement to be considered genuine self-employment.

Following its recent employment status consultation, we also see a role for our self-employment matrix as government considers codifying the employment status tests. We think bringing the employment status tests into statute could well bring more clarity.

Government should be careful though not to simply replicate the current confusion around the case law. IPSE believes policymakers should go back to a “first principles” basis and consider which factors really make up genuine self-employment – using IPSE’s self-employment matrix as a framework. 

About Jordan Marshall

Jordan Marshall _ IPSE's Policy Development Manager

Jordan Marshall is IPSE's policy development manager. IPSE, the Association of Independent Professionals and the Self Employed, is the voice of the UK’s self-employed population who make up one in seven people working today.

 

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27th Jun 2018 10:55

This is an excellent initiative, it looks like all of my construction industry sub-contractors are far from being self-employed.

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27th Jun 2018 10:58

Nice to see an attempt at concise, 'simple' clarity based on a combination of reality and attention to case law.
When compared to HMRC's puerile attempt at a questionnaire, which is clearly designed to nudge to their preferred outcome, this is sterling stuff.
What a shame that the politicians will, as a result of indolence, idleness and vainglory, elect to misunderstand the importance of this stuff and choose to accommodate HMRCs malign contrituration of SMEs and the gig economy - with the concommitant loss of business agility and flexibility at a time when we will need it most.

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03rd Jul 2018 17:45

I'd love to see this applied to all those public sector contractors who are now complaining that they are wrongly being treated as "employed" having never previously applied IR35, particularly NHS locum doctors and agency nurses

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