Employee or independent contractor?

How the courts decide

No single test decides it. The Industrial Court weighs all the facts, including:

• Control: do you decide how, when and where the work is done?
• Integration: is the person part of your business, or providing a service to it from outside?
• Financial risk: does the person invest their own money, carry their own costs and stand to make a profit or loss?
• Tools and equipment: who provides them?
• Personal service: must the person do the work themselves, or can they send someone else?
• Other clients: is the person free to work for others?
• Deductions: are NIS and PAYE deducted from their pay?
• Intention: what did both sides intend, as shown by the contract and how it actually works?

The key question the Court has asked since 1972 is whether the person is doing the work as someone in business on their own account.

Two cases

• Contractors and General Workers Trade Union v Lake Asphalt (1995): a customs broker paid a monthly fee, with no set hours and outside any bargaining unit, was held to be an independent contractor. No severance was payable.
• Transport and Industrial Workers' Union v Blue Waters Products (Court of Appeal, 2022): a worker the company called a contractor was held to be an employee. NIS and Health Surcharge had been deducted, he took vacation leave and he was assigned a company vehicle and helpers.

The cost of getting it wrong

If a "contractor" is found to be an employee, you may face:

• NIS contributions you should have paid, plus penalties
• PAYE you should have deducted
• a trade dispute at the Industrial Court if you end the arrangement
• severance under the Retrenchment and Severance Benefits Act, which does not apply to genuine independent contractors
• minimum wage, leave, overtime and workmen's compensation obligations

Quick self-check

If you tick three or more, the person is likely to be an employee:

• You set their hours
• You tell them how to do the work, not just what result you need
• They use your equipment, uniform or premises
• They work only for you
• They cannot send someone else in their place
• You pay them a regular wage or salary rather than against invoices
• They have worked for you continuously for a long period

0 of 7 ticked