Providing Your Services Via a Company May Not Always Be a Good Idea

There can be advantages, both in terms of flexibility and tax efficiency, in providing your services via a private company. However, as an Employment Tribunal (ET) ruling showed, such arrangements may also have the less desirable effect of stripping you of any employment rights you might otherwise have had.

A nurse who worked part time at a care home launched ET proceedings against its owner, alleging unfair constructive dismissal and that she had been subjected to racial discrimination and harassment. The owner denied her claims and, at a preliminary hearing, contended that they could not in any event succeed in that she was not an employee within the meaning of Section 83 of the Equality Act 2010.

Upholding the owner’s argument, the ET noted that she had for some years provided her professional services through a private limited company of which she was the proprietor and sole director. Invoices for her work were raised on company-headed notepaper and the owner’s remittances were always addressed to the company rather than to her.

She took a salary from the company and took responsibility for paying her own Income Tax and National Insurance Contributions. She was not subject to appraisals or training requirements and did not need the owner’s permission to step down from working a shift. When she was unavailable for work she was able to substitute a suitably qualified replacement.

In ruling that there was no contract, whether express or implied, between her and the owner, the ET found that there was no irreducible minimum amount of work that she was required to perform. Her entitlement to provide a substitute indicated that the personal provision of her services was not the predominant purpose of the arrangements. She enjoyed a high degree of autonomy in carrying out her duties and her relationship with the owner was not one of subordination or control.

She did have certain duties and responsibilities with which she had to comply. The ET noted, however, that all nurses must comply with such requirements under the Nursing and Midwifery Council’s code of conduct, regardless of their employment status. There was, overall, insufficient mutuality of obligation to give rise to an employment relationship.

The company was not simply a vehicle via which the owner made payments to her. The practical reality of the working arrangements was that she was carrying on a business. The owner was her company’s client or customer. Given her lack of employment status, the ET dismissed her claims on the basis that it had no jurisdiction to entertain them.