I find work through a recruitment agency. Am I an “employee” or a “worker”?
A normal agency contract is not a contract of employment, nor is it a contract of service. The courts have agreed that an agency worker is neither an employee of the agency, nor an employee of the client. The two key conditions that must both be met for there to be a “contract of service”, i.e. mutuality of obligation (the employee works as directed and the employer pays for the work performed) and control (by the employer over the work performed by the employee), are not both met by either the agency or the client. You are not, therefore, entitled to the statutory employment rights and benefits that are available to “employees”.
Although you are not an employee, tax law requires you to be treated as an employee for payroll purposes. As long as it is the agency that pays you, the agency must deduct PAYE tax and employee NICs through the payroll and pay employer NICs on your earnings.
An agency contract does not satisfy the statutory definition of “worker”. Even so, some employment legislation brings agency workers into the scope of some employment rights, including the national minimum wage and the rights set out in the Working Time Regulations.
However, some agencies issue contracts of employment to their workers that spell out the terms of their employment with the agency and, as a result, they become employees of the agency. If you are in this situation, you are entitled to all employment rights available to employees and workers.
In recent years the courts have considered a variety of arguments, some quite ingenious, that could result in agency workers being treated as employees and, as a result, receiving statutory benefits that are currently reserved only for employees. None of the arguments have been accepted. In fact, on 5 February 2008, in the case James v London Borough of Greenwich, the Court of Appeal criticised attempts by lawyers for trying to get the courts to provide rights for agency workers that the law just does not provide. The lead judge suggested that it would be better for them to spend their client’s money lobbying Parliament for a change in the law.
From April 2010, the Government intends to extend the requirements of the European Directive on Agency Workers to the UK. It will require agency workers, after a period of 12 weeks in an assignment, to be provided with the same basic working and employment conditions as they would have had if they had been recruited to do the same job by the business for which they are actually working. The Directive and the UK regulations will not, however, make any changes to the employment status of agency workers – they will still be neither “employees” nor “workers”. Time will tell whether such measures will satisfy the aspirations of agency workers.
More FAQs Related to Employment Status – Employed or Self-employed?
What is the difference between a “contract of service” and a “contract for services”?
Who are “employees” for payroll purposes?
I am self-employed. Am I entitled to holiday pay or any other benefits from my client?
I am a company director. Am I an “employee” or a “worker”?
I am self-employed. Why does my client insist on putting me on the payroll?
My company is a managed service company. Am I an “employee” or a “worker”?
I am subject to IR35 rules. Am I an “employee” or a “worker”?