smallbusiness.co.uk: Helping your business think big

Holiday entitlement for sole traders and the self-employed can be a tricky business. In the intance of a self-employed decorator who has worked for the same company for nearly two years, Peter Done explains why it's such a complicated issue.

The first issue that has to be decided in a situation like this is the correct contractual relationship. You state that you are self employed but it is possible that, if you have been self- employed but working for the same ‘employer’ for nearly two years that sometime during that period the employment relationship has changed from that of contractor to subcontractor to that of employer and employee. It all depends on the details.

It is also possible that the relationship could be one of contractor and worker. Worker is defined as somebody who works under a contract where they undertake to perform personally a task or duty. (The official definition is someone longer and more complicated but that short version describes the main points). In those circumstances you would be entitled to the minimum amount of holidays i.e. four weeks per annum as set down in the Working Time Regulations 1998.

If you are self-employed and not a worker then you would not be entitled to holiday pay. Issues which would be considered in deciding precisely what is the contractual relationship would involve a large number of questions but, again precisely for this answer, these are the five main questions to that need to be asked”

1. What was the intention of the two parties as to what the contractual relationship should be?
2. How is the self-employed decorator ‘paid’? This is far more than simply the money they receive, but are they paid by invoice statement, tendering etc or are they simply paid by pounds per hour?
3. How much control does the ‘employer’ exercise? For example, do they say precisely when and how work must be done – or is it left that the decorator simply has a target date by which time the work must be done?
4. Is the decorator really in business on their own account? By the exercise of management, judgement and control, are they in a position to affect the profitability of their business?
5. Is there any mutuality of obligation? Does the ‘employer’ have to provide work and does the decorator have to do it if it is provided?

All of these questions, and sub-questions arising from them, will determine precisely what the relationship is. It would not be a surprise that I would recommend taking professional advice on this issue!