Contractors have a business-to-business contract of services with their clients or agencies and, as with any other business arrangement between two businesses, the contractor has no rights except under contract law.
Bob’s been hired to tile your bathroom, and you agree to pay him £200 a day. But he does not turn up for work one day, so do you still pay him?
Sue’s a landscape gardener and starts work on what you anticipate to be a three-month project. But after two months, you run out of money and tell Sue to stop work at the end of the week. Is she entitled to redundancy?
You’re unhappy with the quality of the work by Andy, your builder. It’s not according to your original specifications, so you terminate the contract. Could he take you to an employment tribunal for unfair dismissal?
Businesses don’t have employment rights
If you have hired a service provider in business on their own account to complete a job for you, you don’t pay them if they don’t come into work, if the work is not up to scratch or when you no longer require the services. Bob, Sue and Andy don’t get employment rights.
When you are a contractor providing a business-to-business service to your clients, you should not expect to receive any employment rights. You agree a contract that says you will provide your client with a specific set of deliverables in exchange for your fee. That contract, and contract law, are what constitute your rights.
Expecting rights is like waving a flag to tell HMRC that you are a disguised employee, and not a true contractor. So if you have been enjoying the tax benefits of operating through a limited company, you may attract the unwelcome attention of HMRC.
Contract laws are your rights
If your client does not pay you, the client is in breach of contract and you can seek redress through the courts using contract law. Similarly, if you fail to deliver what the contract specifies, they, too, can go to law. So get the contract right from the start.
Contractor limited companies are small businesses like any other – even if they only employ a single, highly skilled flexible worker, it does not differentiate them from other small limited companies.
Contractor mindset tip:
Contractors have a purely business relationship with their client or agency and do not qualify for employment rights.