Freelancers' Questions: Can I control a sales freelancer with set targets?
Freelancer’s Question: I’m thinking of taking on a freelancer for a sales role in my small business. Will I be able to set this self-employed individual targets or must I take a hands-off approach?
I’d like to set an objective (or six knowing me!) and let them work towards that goal, leaving them to their own devices to achieve the sales. But I’m pretty sure there’s some legislation affecting how much an engager can ‘boss’ freelancers isn’t there?
Expert’s Answer: Yes, you can set targets for freelancers.
However, it is important not to exert too much control over the freelancer, as the more control, the more they will look like they have the status of an employee, rather than an independent contractor.
Oultine, and then take a step back
It is great that you want to leave them to their own devices to achieve the sales. Ideally you would outline the project, targets and deliverables at the start of the engagement and then leave the individual to their own devices to determine how and when they achieve this, giving the individual a greater degree of freedom in their method of working than you would give to an employee.
Control is one of the three key indicators of employment status, together with:
- personal service - if an individual is required to provide their services personally and does not have the right to substitute someone else in their place, that suggests the individual is an employee; and
- mutuality of obligation - if there is an obligation on the parties to offer and accept work then that may indicate an employer/employee relationship, Alternatively, if the individual can turn down work if and when they want to, that suggests a self-employed status.
If HMRC or an employment tribunal found that all three markers of employment applied to your relationship with the individual sales person, then they would be likely to be deemed to have employment status.
What you could have to fork out
Consequently, you would be liable for PAYE and NI contributions, to pay at least national minimum wage, pension contributions, holiday pay, statutory sick pay and certain family friendly rights and rules regarding working time would apply to them.
Furthermore, those with two years’ continuous service also have the right not to be unfairly dismissed. So getting the classification of working status wrong can be a costly mistake!
It's the working reality that matters
It is important to remember that the tribunal is able to disregard the terms of the contract and look at the reality of the relationship, so it is important that you treat this person as an independent contractor from the outset and day-to-day.
For example, where you can allow substitution it is helpful to do so and if the freelancer clearly carries on their own business (such as providing sales services to a number of clients), that will help to distinguish the freelancer from your employees.
So it is helpful to ensure that you understand the way in which they operate.
Where worker status is likely to apply
But if you will require this individual to provide their personal service and won’t allow them to send a substitute, then they will be much less likely to meet the legal test for independent contractor status and will be more likely to have the status of a ‘worker’ (the category that sits between employee and independent contractor).
Such ‘workers’ are entitled to holiday pay, national minimum wage and pensions contributions, and rules regarding working time will also apply.
The expert was Sarah Verrecchia, senior associate at London law firm Harbottle & Lewis.