Frequently Asked Questions: Definitions of employee, self-employed, volunteer

In employment law a person’s employment status helps determine their rights, and their employer’s responsibilities.

Great care should be taken in defining employment or volunteer status and NICVA has developed a series of questions and answers (available for download below) relating to this area, and it is hoped that this will provide some general guidance to the sector.

 It is important, however to remember that employment status is dependent on a number of factors and unique circumstances in any given situation. Further advice may be required in order to ensure that practices and actions are appropriate.

Frequently Asked Questions: Definitions of employee, self-employed, volunteer

Q1. Can I pay a volunteer?

A volunteer is defined as: 'A person engaged or to be engaged in an activity for a non-profit organisation or person which involves spending time unpaid doing something which amounts to a benefit to some third party other than, or in addition to a close relative.' Volunteers can be reimbursed for travel and other approved out-of-pocket expenses.

A major issue to be concerned with in relation to volunteers is their employment status and therefore whether they acquire the rights associated with being an employee or a worker and/or protection from discrimination. Genuine volunteers do not have these rights and protections. To establish entitlement to employment rights, the volunteer first needs to show they have a contract with the organisation concerned. This does not need to be in writing. One way which might confer this status on a volunteer would be to pay or reimburse the volunteer for their time.

Q2. What’s the risk if the lines are blurred between worker and volunteer?

Wrongly categorising an individual as a volunteer, and therefore not affording them their rights and protections, could have serious consequences. Descriptions such as “voluntary worker” should be avoided. For example, if the individual is found to be a worker, an organisation could be liable for up to six years’ backdated National Minimum Wage, with a criminal penalty where neglect to pay such sums was wilful or for the purposes of avoiding paid annual leave. If an individual is found to be an employee, they would then potentially have employee rights, such as the right to claim unfair dismissal, rights in relation to statutory redundancy payments, paid annual leave, and so on.

Q3. Do we need a volunteer “contract”?

To avoid inadvertently awarding employee or worker status on volunteers, it would be helpful to draw up a “letter of understanding” for the volunteer that states the intended arrangement, confirmation there will be no pay and uses flexible, non-contractual sounding language like “suggested”. Volunteer Now may have some guidance on volunteer arrangements, but “contracts” should be avoided.

Q4. We want to employ a volunteer. Can we just start paying them for the work they are already doing?

No. If you are able to fund a new role, regardless if it is already being successfully carried out by a volunteer who you feel is the best person for the job, you must fairly and openly recruit for the post. In order to comply with their responsibilities under equality legislation, employers should advertise as widely as is practicable so that as many eligible and suitably qualified candidates as possible have an opportunity to apply.

Where practicable, employers should use a variety of different media (for example newspapers or online) to publish their advertisements. So long as they also advertise widely within a variety of media, employers who are taking affirmative or positive action may also lawfully place “targeted” job advertisements in specialist media which are associated with particular underrepresented groups.

Employers should not publish job advertisements in locations or publications where they are likely to be read only by persons known to the organisation or are potential preferred candidates, or from one particular group or background.

Q.5 What is the difference between and employee and a self-employed person?

The Employment Rights (NI) Order 1996 states that:

• employers must provide all employees with a written statement of main terms and conditions of employment within two months of commencing employment
• the right to a written statement applies to all employees whether full-time or part-time, permanent or temporary, irrespective of hours worked.

An employed person is someone who works under a contract and will have a mutuality of obligation, i.e. they each have responsibilities as an employee and as the employer. They will normally be integrated into the organisation, and their work will be carried out for the employer, according to their instructions, with the employer having some degree of control exercised over the individual. An employee will often work exclusively for one organisation and will be paid by the employer through the payroll (including tax and NIC).

A self-employed person is someone who contracts out their services and who is therefore normally free to work for more than one organisation. This might be done by a Consultant’s Agreement under which a person, usually with specialist skills, is contracted to complete a particular piece of work or whose services are retained for a certain number of days per year. A self-employed person will not perform services that can be controlled by an employer. In the relationship between the organisation and the self- employed person, the client or payer, has the right to control or direct only the result of the work and not what will be done and how it will be done.

The distinction of employed or self-employed is important because a selfemployed person must organise their own income tax and National Insurance contributions. A contract for such a person is known as a contract for services and is therefore not a contract of employment. Great care should be taken before treating someone as self-employed as, if incorrect, the organisation could be liable for the income tax and national insurance it should have deducted under PAYE legislation.

HMRC have some guidance which may help define this.

Q.6 Should we have a written “contract” with self-employed people who provide a service?

A self-employed person may be referred to as a consultant, freelancer, sole trader, contractor or Limited Company. Self-employed facilitators, trainers, consultants and artist’s services are often engaged within the sector. This is a different type of contract and is usually referred to as a “Contract for Services” and would be used by an organisation if a person is self-employed or working on a consultancy basis.

Where a self-employed person provides a one-off service or services; completes an agreed piece of work or contributes to a project, they are paid a fixed price for their services usually invoicing the organisation for their service, expertise or time. Self-employed service providers are usually selected through a tender process, advertisement or by comparison of quotes for work. When drawing up an agreement it is important to avoid words such as “contract” or “staff” which suggest that this is a contract of employment and the person is employed by you. A “Contract for Services” or “Facilitator/Artist/Consultant Agreement”, may help clarify and define the nature of the arrangement.

To advertise a job: www.communityni.org/jobs or a volunteer opportunity: www.communityni.org/opportunities

For further help or information please contact:

Labour Relations Agency www.lra.org.uk/ 028 9032 1442 [email protected]

HMRC www.hmrc.gov.uk/working/intro/empstatus.htm

Volunteer Now www.volunteernow.co.uk 028 9023 2020

[email protected]