Employed or self-employed?

Questions regarding self employment are by far the most frequently received on the HJi Legal Forum. Like all practices there are pros and cons in having self-employed stylists. Here is a selection of your queries.

There are two types of arrangement: either the individual rents a chair, or the freelancer sells their services to the salon.

In the former, the salon has a guaranteed income for the duration of the agreement. In the latter, the self-employed person sells their services directly to the salon, and this is sometimes expressed as a percentage of the takings. In some cases, salons have attempted to merge the two.

Salon owners save the costs of holiday pay (nearly six weeks per year), National Insurance costs and, of course, many of the challenges of managing staff and issues like maternity and sickness absences.

This is a complex issue. However, Her Majesty's Revenue & Customs (HMRC) has produced a useful checklist of characteristics of a self-employed person (this is a useful reference, as it may be HMRC that inspects a salon to determine if someone is self employed).

All of the following are characteristics of an employee:

- They have to do the work themselves and can't send a substitute.

- They have to work fixed, pre-determined hours.

- They are allocated tasks to complete.

- They are paid by the hour/week.

A genuinely self-employed person, on the other hand, can hire someone to do the work on their behalf, and they can decide when they wish to provide the service. 

A genuinely self-employed person is running their own business in competition with you. Their performance can impact on your business and, as they aren't employed, they can't be disciplined. In most cases, the clients are the self-employed person's clients and not the salon's so, when they leave, the clients go with them. It is essential you have a written Contract for Service or chair rental agreement in place to protect you. Many salons have been inspected by HMRC to check if the person is genuinely self employed. 

If the stylist is successful then a percentage of that income can be more lucrative to the salon owner. However, what if he/she is off ill or isn't successful? There is also much more temptation to require the stylist to attend for fixed hours even if they have no clients, which isn't consistent with self employment.

Definitely. This can happen if a problem occurs in the relationship between the parties. If the agreement ends - for example, if the service provider becomes pregnant - they are free to go to Employment Tribunal and argue that the agreement was a sham and they were really an employee. If, at the preliminary assessment, the Tribunal decides the relationship was one of employer/employee, a claim could be made in relation to unfair dismissal, minimum wage and holiday pay. 

In a recent case, the relationship between a salon owner and a self-employed stylist deteriorated. The salon owner felt the self-employed stylist was deliberately undermining him. He would have taken disciplinary action but couldn't because she was self employed. He decided he did not want to use her services any more. 

She took her claim to Employment Tribunal, claiming that she was really an employee and had been unfairly dismissed.

The Tribunal decided she was an employee. They noted that she worked according to a rota, there was a specific break time, and she had to be available even if she had no clients. In short, her work and time were totally controlled and she wasn't free to operate her business and work elsewhere. 

Having decided she was an employee, the decision about unfair dismissal was a formality. There had been no disciplinary hearing and no warnings. The Tribunal did not think her action would, in any event, have been gross misconduct.

She was awarded in the region of £5,000. The employee could, but didn't, make a claim for paid annual leave that she hadn't received but was entitled to once it had been decided she was an employee.  

David Wright advises Habia and salons across the UK. For an all-inclusive annual fee of £200, you can contact him with your employment queries. He will write your contracts and produce your policies and salon handbook. In addition. you will receive a monthly newsletter full of practical advice.

Call David on 07930 358067, or 01522 831061, email [email protected], or visit 

www.davidwrightpersonnel.co.uk.