Don’t get caught out: Is my freelancer actually an employee?

Freelancers can look like the perfect solution for small businesses.
Flexible, skilled and cost-effective.

But this seemingly simple setup can hide serious risks if the working relationship isn’t what it appears to be.

Why employment status matters

It’s not just about what the contract says. It’s about how the work actually happens.

UK law recognises three categories: employee, worker, and self-employed.

The line between them can be blurry, which is why tribunals and HMRC look at the real relationship, not just the paperwork.

Misclassifying workers can lead to:

• Unexpected tax and National Insurance liabilities

• Back pay for holiday or other employment rights

• Tribunal claims

• Financial penalties

The key tests for employment status

These are the main checks used by HMRC and tribunals to decide if a freelancer is actually an employee.

Control

• Do you decide when, where and how they work?

• Can they refuse work or choose their hours?
  The more control you have, the more likely they are to be seen as an employee.

Substitution

• Can they send someone else to complete the work?
  If you insist the work is done by a specific person, that points towards employment.

Mutuality of obligation

• Are you required to offer work and are they expected to accept it?
  A pattern of regular work suggests employment rather than self-employment.

Integration

• Are they part of your team?

• Do they use your equipment or have a company email address?

• Are they included in staff meetings or team communications?

  The more integrated they are, the more likely they’ll be seen as part of your workforce.

Financial risk

• Can they make a profit or loss on the work?

• Do they carry the financial risk if something goes wrong?
  Employees rarely do, freelancers usually do.

What really matters in your contracts

A written contract is only the start. The real test is what happens day to day.

• Compare what the contract says with how the work is managed

• Check whether their working pattern matches what’s agreed

• Be honest about whether the arrangement still fits a freelance model

The grey areas

Employment status can be complex.

The 2021 Supreme Court case against Uber is a good example.
Drivers were called self-employed, but the court ruled they were actually workers because of how much control Uber had over their work.

The takeaway is simple: labels don’t define status. The reality does.

Protecting your business

If you use freelancers regularly, review your contracts and working arrangements before they become a problem.

It’s far easier to correct mistakes now than to defend them in a tribunal later.

Arrange a contract review today and make sure your freelancers are genuinely self-employed.