A Guide to Dependent Contractors for Limited Companies

The Taylor Review made some interesting propositions about the status of workers in the UK and has undoubtedly raised some questions. Of particular prevalence to our contractors was the status of workers, as it seems some changes may be on the horizon. The previously named ‘gig economy’ worker is now set to be renamed ‘dependent contractor’, and with this would come a new set of legislation. 

If you are a limited company director who has workers, this could cause some uncertainties about the status of your workers and how this affects you as the employer. Read our guide to discover what changes the Taylor Review have proposed and how this could impact you. 

What changes did the Taylor Review propose to contractors?

Of particular interest was the term dependent contractor and the redefinition of worker statuses. According to the review, there is still set to be three worker classes – employee, worker and independent contractor, with the now-named worker category being rebranded as ‘dependent contractor’. Under new guidelines, as proposed in the Taylor Review, the dependent contractor could have the same freedoms as a self-employed worker, with the same rights as a company employee.

The changes proposed in the Taylor Review seem to be making attempts to reform the employment industry and better improve rights, whilst making the categories of workers more clearly defined. One step in this process was to redefine what it means to be a dependent contractor, an employment status which is set to replace what is currently referred to as a gig worker and provide benefits closer to the full-time worker.

How to determine whether your workers are dependent or independent contractors

Currently, there is no definitive legislation which dictates whether a contractor is considered dependent or independent. Under suggestions made in the Taylor Review, workers who have a “controlling and supervisory relationship” with their employers would be referred to as dependent contractors. 

The Taylor Review places a strong emphasis on degree of control rather than whether the worker is required to perform duties personally when making the assessment as to whether a contractor is dependent or independent. If you are unsure, you should look to the level of direction you give to your workers in matters such as rate of pay and hours of work. 

How could the Taylor Review affect your employees?

If you are a limited company director and employ workers, it is possible that the new changes which the Taylor Review is looking to implement could affect your practices. As the dependent contractor may be set to receive an additional set of benefits, this may, in turn mean a change to your obligations as a director. The report states that it should be easier for workers to gain access to employment rights similar to a full-time worker. 

The report also suggests certain changes which could affect the rights of your employees under the guise of ‘fair and decent work for all’. Under new guidelines, workers could be entitled to annual leave, sick leave in the event of illnesses and maternity/paternity leave. The report urges that dependent contractors should be entitled to National Insurance contributions which should be deducted from their salary by their employer. 

In addition, you may be required to create a written statement for your workers on the first day of their employment which will outline terms of work, salary and hours. The Taylor Review urges firms to provide their workers with the opportunity to earn the entitlement to request a fixed number of working hours. There is also set to be a potential for your workers to earn the national minimum wage, though if the contractor chooses to work during hours of low demand, they may forgo this right. 

Will this impact my IR35 status?

The changes proposed to dependent contractors are not expected to impact whether you fall inside or outside IR35 as the status of your employees should not directly influence how the government views your business. You can find more information about IR35 by reading our in-depth guide

How can SJD help?

As the UK’s largest provider of accountancy services to freelancers and contractors, we have a wealth of experience to handle all of your finance needs. For further information about the Taylor Review and how this may affect you, please contact us on 01442 275789 or newbusiness@sjdacccountancy.com to speak to New Business team.