Contractor or Employee in the Construction Industry – What’s the Difference?

Contractor or Employee in the Construction Industry – What’s the Difference?

02nd January 2019

It’s vital to get employment status right as this has an impact on legally binding rights and obligations including how you manage tax and insurance, and which employment law right apply.  An employee incorrectly classed as a contractor could make a claim against your company – demanding back-dated holiday pay, for instance, or right to redundancy payment.  Today we’re going to clarify the differences between these statuses so that you can determine which is the best option for your current construction company business needs.

An independent contractor (sometimes referred to as a consultant or freelancer) is a self-employed person who carries out work for you.  They are usually contracted to work on a specific project for a defined period of time.  In the eyes of the law, it’s the working arrangement that determines employment status and it’s possible that somebody begins working for you as a contractor but the relationship evolves into one of employment under certain circumstances.  This change could be as a result of the following:

  • Control over working hours and how the work should be carried out shifts to the client (your company), and
    • A mutuality of obligation arises where the employer is expected to provide work and the worker to accept it; or
    • The worker must carry out the work themselves, rather than providing a substitute to carry out the work.

Contracting is different from being employed and companies generally hire contractors because they can “hit the ground running”, do the job and leave without any complications and employee baggage like sickness, payroll, pensions, holiday entitlement, etc.

The main differences between contractors and employees are as follows:

CONTRACTOR

EMPLOYEE

Paid per job or for a defined period of time, rather than receiving an annual salary.

Is paid by the hour, week or month, based on an annual salary or hourly rate agreed at the start of the employment.

Submits an invoice for work carried out.

Is obliged to accept work offered and the employer must provide work.

Is responsible for paying their own tax and national insurance.

Is subject to control over how their work is performed.

Holds their own professional insurance.

May be subject to restrictions around working for other people during and after their employment.

Works for other companies.

Cannot hire somebody else to carry out the work on their behalf.

Determines from where they work.

Must work exclusively for their employer at a time and location determined by the employer.

Use their own tools and equipment.

Includes employees who work part time, term time only, over the weekend or casual hours.

Must make good any errors in their work free of charge.

 

 

Next week we’ll be looking at the advantages and disadvantages of both hiring contractors and employing workers in order to provide construction company owners with the information necessary to make an informed decision on which type of employment best suits their business requirements.  Why not follow us on Twitter or Facebook to make sure you don’t miss out?