Sole traders: employment status in practice

Status is decided on the facts

Nothing about registering as self-employed settles employment status. It is decided by how the work is done, and it can be decided differently by HMRC and by an employment tribunal for the same engagement.

The label on the contract is evidence, and it is the weakest evidence available.

What is actually examined

• Control over what is done, how, when and where.
• Whether a genuine right of substitution exists and could be used in practice.
• Whether there is any obligation to offer or accept further work.
• Financial risk: who bears the cost of correcting defective work, who provides equipment, whether a profit can be made by working efficiently.
• Integration: whether the person is presented to the world as part of the organisation.

What the engager carries

If the arrangement is recharacterised, unpaid PAYE and National Insurance, interest and penalties fall on the engager, not on the worker. Employment rights claims can follow separately.

This is why many clients now refuse sole trader engagements even where they would probably be defensible.

The safer route

Where the working pattern looks like employment, using an employment model removes the argument entirely — and costs less than defending it once.