{"id":35475,"date":"2018-12-05T09:30:43","date_gmt":"2018-12-05T09:30:43","guid":{"rendered":"https:\/\/www.highspeedtraining.co.uk\/hub\/?p=35475"},"modified":"2022-06-14T12:15:06","modified_gmt":"2022-06-14T11:15:06","slug":"differences-contractors-employees","status":"publish","type":"post","link":"https:\/\/www.highspeedtraining.co.uk\/hub\/differences-contractors-employees\/","title":{"rendered":"What are the Differences Between Contractors and Employees?"},"content":{"rendered":"

If your business requires someone to work for you in a way that doesn\u2019t follow standard terms of employment or typical shifts, it can be confusing to know how to define them. The requirements you must follow under employment law may vary depending on the type of people you employ, so it\u2019s crucial to understand the differences between certain roles.<\/p>\n

In particular, you should understand what separates contractors and employees from one another. Many businesses rely on contractors to carry out one-off or infrequent tasks, and although they don\u2019t work for you full time, you still have legal duties to fulfil if you plan to hire them.<\/p>\n

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This article defines the key differences between contractors and employees. It explains which you may need for certain roles and provides an overview of how to properly comply with the law when you do choose to hire contractors.<\/p>\n

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What’s the Difference Between Contractors & Employees?<\/h3>\n

Contractors and employees differ in numerous ways. Employees have permanent positions in a business, meaning they have certain employment rights, the company sets their tasks, and they primarily work for you. A contractor, on the other hand, typically works on a temporary basis and has fewer rights, but they have greater control over their work: they control the time, place, nature, and cost, and can work for numerous businesses at once.<\/p>\n

More specifically, the main differences that separate contractors from employees are set out in the table below. <\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\u00a0<\/strong><\/th>\nEmployees<\/strong><\/th>\nContractors<\/strong><\/th>\n<\/tr>\n
Contractual Agreement<\/strong><\/td>\nEmployees have a long-term, permanent commitment to a company for the foreseeable future. Under their employment contract, they must receive and complete work on a regular, ongoing basis.<\/td>\nContractors have no permanent obligation to the companies that request work from them. Companies will seek out contractors to complete set amounts of work as and when they need it, but the contractors can accept or reject requests as they choose. If they do accept the work, they are only obliged to work for the company for as long as that set amount of work takes.<\/td>\n<\/tr>\n
Legal Rights<\/strong><\/td>\nEmployees are entitled to several legal rights, including paid annual leave (28 days minimum for full time), statutory leave, minimum notice periods, protection against unfair dismissal, flexible working, time off for emergencies, joining a pension scheme, redundancy pay, and more.<\/td>\nContractors have fewer legal rights when they carry out contractual work for a company. For example, they are not entitled to receive paid annual leave from them. However, companies must fulfil health and safety and data protection laws for contractors.<\/td>\n<\/tr>\n
Time and Place<\/strong><\/td>\nThe company sets employees\u2019 hours, days, and location of work.<\/td>\nContractors are in control of how many hours and days they work for companies that hire them. As they accept or deny requests for work, they are in control of where they go.<\/td>\n<\/tr>\n
Wage Requirements<\/strong><\/td>\nThe company establishes the salary that they will pay the employee, and must at least pay them minimum wage.<\/td>\nContractors set the amount of money they charge for each job, which can vary depending on the level of work. Therefore, it is not on a salary basis. Rather, they usually issue invoices.<\/td>\n<\/tr>\n
Commitment Level<\/strong><\/td>\nEmployees only work for the company with whom they\u2019re employed. However, they can work for another business as long as the two jobs do not impact on each other. Some companies may set out a clause in their contract that states they can’t work for someone else in the same industry.<\/td>\nContractors can provide work for more than one business at a time. They can also provide work to businesses within the same industry. Depending on their type of work, this may in fact often be the case.<\/td>\n<\/tr>\n
Job Role<\/strong><\/td>\nAn employee\u2019s job role and the type of work they do on a daily basis is set by the company.<\/td>\nContractors are in control of their job role and the type of work they offer to companies. They can carry out the work however they want.<\/td>\n<\/tr>\n
Training Requirements<\/strong><\/td>\nThe company is required to appropriately manage their employees’ health and safety. They must provide employees with certain information, instruction, and training, and implement organisational procedures, which all employees must comply with.<\/td>\nContractors will have likely received their own training, so they can carry out their work competently. However, companies that request work need to ensure that the contractors have appropriate information and training for the work they’re going to undertake. In particular, employers still have a duty to manage contractors\u2019 health and safety, though they share the responsibility more than employers and employees do.<\/td>\n<\/tr>\n
Taxation<\/strong><\/td>\nThe company handles employees\u2019 tax, usually through a PAYE system.<\/td>\nCompanies who hire contractors are not responsible for their tax, as they pay a one off, set amount of money. The contractors themselves or the company who hires them out are responsible for handling their tax.<\/td>\n<\/tr>\n
Role Execution<\/strong><\/td>\nEmployees must carry out their role themselves. They cannot send someone else in to do their work.<\/td>\nContractors can exchange work with other contractors if they are part of a team. They can send subcontractors to carry out the work for them if they choose.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

As this table shows, a company\u2019s responsibilities regarding employees and contractors do differ in many ways. However, many of your legal duties still apply, such as health and safety. Therefore, if you plan to hire contractors, you must properly communicate and coordinate with them about safety measures.<\/p>\n

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Construction Industry Scheme (CIS)<\/h3>\n

Self-employed contractors and subcontractors who carry out construction work must take note of CIS. It requires contractors to register for the scheme and deduct money from subcontractors\u2019 payments, so they can pass it on to HMRC. Subcontractors must also register.<\/p>\n

For more information, visit the government website<\/a>.<\/p>\n

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Zero Hour Workers<\/h3>\n

It\u2019s important to not confuse contractors with zero hour workers<\/strong>, which refers to a casual agreement between employers and people who carry out work for them. In a zero hour contract, the employer does not guarantee the person a set number of hours. Rather, they offer work as and when it\u2019s available. The zero hour worker can either accept or reject these offers as often as they want. They can also have more than one zero hour contract at once if they choose.<\/p>\n

\"Woman<\/p>\n

If they accept work, they are entitled to at least the National Minimum Wage. They will also accrue certain rights, such as holidays and rest breaks, depending on how much work they carry out over time. However, they are always entitled to other statutory employment rights, such as protection from discrimination. Also, unlike contractors, they must carry out the work themselves, so cannot send someone to do it for them.<\/p>\n

You can find out more with our Definitive Guide to the Zero Hour Contract<\/a>\u00a0and on the government website<\/a>.<\/p>\n

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Do I Need A Contractor?<\/h2>\n

Hiring contractors is ideal for occasional, short-term tasks, such as maintenance work on a building or equipment. It\u2019s also useful for when you need a set amount of work carrying out and you won\u2019t have more available once it\u2019s complete, such as creating a new website. Furthermore, certain work must be carried out by people with appropriate licensing. For example, gas engineers must be Gas Safe registered to legally work on gas appliances.<\/p>\n

Examples of jobs that suit contractor work include:<\/h4>\n