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Determining employment status

The law traditionally distinguishes between a “worker” who works personally under a contract of service or employment (an employee) and a person who works under a contract for services (self-employed or independent contractor).

The distinction between a contract of employment and a contract for services is important as it determines who is liable to pay income tax and national insurance contributions and whether the worker has employment rights i.e. the right to paid holidays etc.

The fact that a worker wishes to be classified as self-employed or Personal Service Company, does not validate that request, as determination of employment status is a matter of fact or interpretation, not choice. 

Any interpretation of a person's status will invariably depend on his or her own particular set of circumstances. To illustrate this, it is possible for a person to be both employed and self-employed whilst working for different employers. It is highly unlikely that a full-time University employee could undertake additional work for the University on a self-employed basis.

Steps to be followed when considering appointing a self-employed worker OR Personal Service Company (PSC)

1. The University engager should complete the employment status checker on HMRC website (ESS)

2. Save outcome as PDF with worker name as reference

3. Ensure that a written agreement exists covering what, how and when the work is to be done and the mechanism for payment - attach to ESS outcome

4 . If the ESS indicates PAYE is to be operated, a discussion with the HR Partner is required prior to engaging, in order to agree the appropriate contractual basis of engagement

5. If the ESS indicates PAYE is NOT applicable payment can be made by Finance Payment Section, forward invoice for processing.

Any queries regarding the above guidance please contact University Payroll and Pensions team.

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