10 Top Tips to Avoid Consultants Becoming Employees

1. Ensure that you have a Consultancy Agreement in place which reflects the actual relationship between the parties. It is not enough to simply state that the consultant is self employed and not an employee. Tribunals will look behind contractual terms when determining employment status if they do not reflect the true agreement between the parties.

2. Ensure that payment is made on production of invoices and not through payroll. Do not pay a predetermined wage or salary but show a negotiated rate for services provided and ensure that the consultant is responsible for paying their own tax.

3. Ask your consultant to provide their services through a limited company. This removes the direct contractual relationship between the client and the individual and allows the client to benefit from IR35 legislation. This makes the consultant company responsible for paying any income tax and national insurance contributions that may be due if HMRC deems the individual to be an employee for tax purposes.

4. Allow your consultant to maintain a sufficient amount of control over when they work, how they work and what times they work. Consider peer to peer supervision rather than supervision by management.

5. Allow your consultant to provide a substitute to provide the services. Keep the discretion to do so as wide as possible. Consider agreeing a list of approved substitutes that can be attached to the Consultancy Agreement.

6. Avoid using the same consultant for an indefinite period without breaks. Use your consultants for distinct tasks and projects and do not prohibit the consultant from working for others.

7. Allow your consultants to use their own equipment, e.g. laptops rather than office computers. Avoid allowing them to use resources such as support staff.

8. Do not integrate your consultants into the workplace, e.g. by giving them a company e-mail address or business cards.

9. Do not pay your consultant when off sick or on holiday. However, beware of a consultant being classed as a “worker”. If the consultant is personally obliged to provide the services themselves they may be classed as a worker and be entitled to holiday pay and other rights.

10. Ensure that you regularly review the arrangements between the parties (e.g. on a quarterly basis) in order to ascertain whether your consultant is still a consultant or whether they are actually an employee and should be treated as such.

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