Do self-employed “workers” know their pension rights?

The self-employed have been marginal to Pension Reform. An obscure section of the 2008 Pension Act makes it possible for them to take part in NEST, however NEST do not advertise they can receive self-employed contributions and I’d be surprised if they have more than a handful of “guinea-pig” contributors. You may have read my blog about this last year

But recently , an important case has been through the Court of Appeal , that may redefine the rights of the self-employed who regularly invoice a single client, to be considered as “eligible” both to join an employer‘s Qualifying Pension Scheme and to get a contribution from the employer in excess of the invoiced amount.

I quote from an excellently written article recent decision of the Court of Appeal that sounds a warning for those companies engaging contractors.

 Contractors who regularly invoice organisations may argue that as individuals working for companies they are in fact employees or workers and not self employed persons in business on their own account.

In such cases, companies may find that they owe unexpected duties to individuals who successfully challenge their status.

In this case, Mr Westwood was a GP with his own practice which employed various people.  He also provided services to an independent medical trust on transgender issues and at weekends  performed hair restoration surgery to HMG Medical Group (HMG), a private clinic.  When Mr Westwood’s contract was terminated by HMG he brought proceedings claiming that he was an employee.  It was found by the Tribunal, confirmed by the EAT and most recently by the Court of Appeal, that whilst Mr Westwood was not an employee of HMG he was a worker for the purposes of employment legislation.

A worker is someone who either works under a contract of employment or under any other contract where they have to undertake to perform work personally and where the other party to the contract is not a client or customer of that individual’s professional business.

It was argued by HMG that Mr Westwood’s self-employed status was as a GP and the fact that he undertook work for both HMG and another medical trust meant he was clearly in business on his own account.  The court found that his work as a GP and the advice on transgender issues had nothing to do with his work for HMG.  Referring to the description of Mr Westwood in HMG’s promotional literature as “one of our surgeons”, the court found that he was an integral part of HMG’s undertaking in providing services in respect of hair restoration.

This result is surprising as there were a number of features of the agreement between Mr Westwood and HMG which indicated he was in business on his own account.  For example, he invoiced HMG by submitting VAT invoices with the stamp of his surgery, was paid by HMG without deductions for PAYE, was required to take out his own professional indemnity insurance, had no set hours of work with HMG and could refuse to carry out surgery if he wished to do so.

Our understanding is that as soon as someone is considered a worker, he or she is protected by employment law – the minimum wage applies as do redundancy rules and crucially for those who operate pensions, the self employed person becomes part of the assessment process for auto-enrolment.

Provided that he or she passes the usual tests on age and earnings, we see them as becoming eligible jobholders.

But here we have some snags. While the Pensions Act gives dispensation for self-employed to join NEST- the functionality to accommodate such people within insured group personal pension and proprietary occupational schemes is limited. Certainly the question of tax relief on personal contributions is far from clear.

It is high time that the grey-zone in which the self-employed exist outside the protection of employment law was better defined. It seems to me that they cannot have it both ways – avoiding tax and NI when it suits but claiming employment rights when things go wrong. Nor can employers get round operating within the rigorous protections of UK employment law – including the auto-enrolment regulations, by keeping such employees off their payroll.

What is clear is that large organisations approaching auto-enrolment need to urgently address the issues that are raised by Lawrence Graham (and others) and , should they find they have a pension obligation to their contractors (including those who are themselves employed by shell limited companies) then they need hard and fast about how they are going to organise the pension contributions.

In answer to the question posed in the title of this article, my experience of talking with our own contractors is that they definitely don’t know their pension rights, nor do they want to. They want a retention of the status quo around which they have organised their day to day finances.

I am not sure that I can provide them with that comfort. But it’s important that this matter is discussed while there is  time to find resolution to whatever problems may be out there!

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About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Do self-employed “workers” know their pension rights?

  1. George Kirrin says:

    Henry, it says on your earlier blog about Tesco pensions that there are now three comments, presumably two further to my own. Yet I’m unable to view these other comments for some reason. Are you able to help, please?

    yours aye, (self-employed) George

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