Atypical Workers

Fixed Term Employees

A fixed term contract is one for a specified time, specified task or one which ends when a specified event does or does not take place.  An example would be a retail business taking on extra staff coming up to Christmas.  Unless special circumstances apply, employees on fixed-term contracts must be treated the same as comparable permanent employees.  This means they must get the same pay, terms, conditions and benefits package, the same or an equivalent pension scheme and the same opportunity to apply for vacancies for permanent positions in the business.

Where a fixed term employee has been on a fixed term contract for four or more years, he or she is classified as a permanent employee. The only exception is where employment on a further fixed term is objectively justified to achieve a legitimate aim e.g. a genuine business end that can be justified.   This rule does not apply to apprentices, work experience employees or certain employees on training courses or temporary work schemes.

Independent Contractors

An independent contractor or “freelance” worker is self-employed and provides services.  An advantage is that they will look after their own income tax and National Insurance payments. However, it is critical that independent contractors are genuinely self-employed.  If the arrangement is really a disguised employment arrangement, then there is a risk of incurring the liabilities of an employer.  Certain contract workers will still be entitled to many rights equivalent to those enjoyed by employees.

Agency Workers

Under an agency arrangement, an agency is contracted to provide services.  This may be appropriate for short time cover.  It can also apply to longer term staff.

Agency workers have their contract with the agency.  However, the contracting business still has responsibilities for agency workers under health and safety rules,  discrimination rules and certain other obligations.

Agency workers have a right to equal treatment with permanent employees of the hirer who do the same job as the temporary worker,  insofar as basic working and employment conditions are concerned. They acquire these rights where they have worked for the same hirer for 12 continuous months. Minor breaks or changes in role do not break continuity. In the case of some breaks, the clock stops and resumes again afterwards

The regulations provide for anti-avoidance . The tribunal may make a further award on the basis that the employer has tried to avoid the regulations.

Part-time Employees

Part-time workers must be treated in the same way as comparable full time workers.  A comparable full-time worker is one who works for the same employer and does similar work under the same type of contract.  Accordingly, part-time workers must enjoy pro rata, the equivalent terms and conditions including equal rates of pay, equal rates for overtime, equal entitlements to the company pension scheme and benefits, equal access to training and career development, equal holiday entitlement, equal right to career break, equal contractual sick pay, contractual maternity and parental leaves, equal treatment in promotion.

Exceptionally, different treatment can be justified on objective grounds.   For example, it may be possible to justify the exclusion of a part-time worker from a health insurance scheme on the basis of disproportionate cost.  Part-time workers who believe they are not being treated equally are entitled to a statement of the written “reasons why” within twenty-one days.  A part-time worker who does not accept the reasons given is entitled to apply to the Employment Tribunal.  It can make an order for compensation if it finds that the treatment is not equal.

Directors

A director is an officer of the company with responsibilities under company law.  This means that he performs certain functions by law in connection with the company.   Executive directors deal with the company’s business and are likely to have an employment contract in addition to their role as a company officer.  Non-executive directors typically give general direction and provide monitoring and specialist functions.

Typically, a board of directors consists of a group of executive and non-executive directors who bring a breadth of skill, experience, contacts and diversity. Directors have certain roles and responsibilities under the England and Wales Companies Act.  It is possible for a person to have the responsibilities and obligations of a director by acting as if he was a director, even if he has not been formally appointed as a director.  This is a “shadow director”.

The new Companies Act 2006 in England and Wales provides a statement of seven general duties that all directors must fulfil. See our separate note in relation to the responsibilities of directors.

Start-up companies need only have one director under the English Companies Act.  An Irish company still requires two directors.

Growing companies typically appoint directors in various fields such as finance, sales, marketing etc.  A structure, might, for example, include a non-executive chairman, a managing director who is employed by the business and draws a salary. There may be a  chairman, a team of executive directors and non-executive directors who advise on strategic direction and decide remuneration of the executive directors.  Non–executive directors will typically be paid fees.

The formalities for the appointment of a director will be set out in the company’s Articles of Association.  It must be consulted in the first instance to verify the procedures involved.  Shareholders may be entitled to a say.

It is possible to have the benefits package comprising salary, shares, share options, pension provision, benefits in kind etc.  The best practice is to have the executive directors pay decided by the non-executive directors in order to avoid a conflict of interest.

Directors play a specific role under company law in running a company.  It is possible to have a director who is simply performing this role (non-executive directors). There are also directors who are employees. In the case of executive directors, there will usually be a detailed employment contract. Certain company law issues and prohibitions arise in relation to benefits taken from the company.

Executive Directors of limited companies are classed as office holders.  The earnings from an “office” are automatically chargeable to tax as employment income and there is also liability for Class 1 National Insurance Contributions.  The majority of non-executive directors will also be regarded as employed by the company or self-employed under a contract for service depending on the terms and conditions.   Directors have a number of different responsibilities under company law, taxation rules and numerous other laws.

Employee shareholders

An employee shareholder is someone who works under an employment contract and owns at least £2,000 worth of shares in the employer’s company or parent company.Employee shareholders have most of the same employment rights as workers and employees.

They also have the right to collective redundancy consultation and the benefit of the transfer of undertakings regulation (TUPE).

Employee shareholders do not have these rights:

• protection against unfair dismissal (apart from dismissal on grounds of discrimination and in relation to health and safety)
• statutory redundancy pay
• the right to request flexible working – except in the 2 weeks after returning from parental leave
• certain statutory rights to request time off for training.

Employee shareholders must give 16 weeks notice if they want to come back early from maternity leave, additional paternity leave and adoption leave. Employers can choose more generous employment rights than the statutory ones.

Employee shareholders can get tax relief on the first £2,000 of shares they get before 1 December 2016.

Existing employees don’t have to accept a change to an employment contract to become an employee shareholder if they don’t want to.

Employers must following certain rules when offering employment shareholder status to their employees.