Any risk if my client moves me from retainer to ‘required 9-to-5’?

Freelancer’s Question: In the past, I've been available to my client on an 85-hour retainer basis, but I would end up doing more hours -- about 120, not that it’s ever been an issue. They're quite flexible but because there's never been a structure, boundaries get pushed weekly, if not daily. Despite asking them not to, for example, the client still emails me at midnight!, Anyway due to changes to their business, a new working option was offered to me and disappointed, I offered help train a replacement to fit their ideal role. But lucky for them and less so for me, the new person is doing exactly what I was already doing without having to work weekends, respond to messages at weekends and they need not pay to travel into London.I had to do all three of these things., I broached this with the client and after them saying it was all one big misunderstanding, they re-engaged me -- albeit on a “9-5 daily” basis, with me “required” to run hourly checks on social media, emails, and with their mobiles/WhatsApp accounts diverted to me.

Unfortunately though, all this is at reduced hours compared to my retainer agreement. I'm not sure what to go back with and counter-propose. To be available on an hourly basis, as the client wants, restricts my availability to have additional clients and hampers my ability to get my teeth into other projects. I'd like to go back with a realistic offer/proposal but I'm really not sure where to start with it. Please advise.

Expert’s Answer: Thank you for reaching out to FreelanceUK with your question about contractual commitments and working hours as a freelancer.

Amid complexity, know your rights and obligations -- even if you're sought-after

Freelancers are in high demand due to their specialised skills and flexible work arrangements, but the relationship with clients can be complex, as evidenced by your situation.

When working as a freelancer, it is important to understand your rights and obligations, as well as those of your client.

Based on the circumstances you outlined, it is clear that you are facing issues with contractual commitments and working hours, which could have legal and tax implications.

Let's take a closer look at what you could consider for your desired counter-offer.

What is the legal position?

In your case, there may be contractual commitments related to the number of hours worked, which could have legal and tax implications.

The specifics of the contract are crucial in determining whether this is the case.

And it is also possible that there was an unwritten agreement to change the working hours – for example, orally, by conduct (working the hours, and having the invoices paid), or this might have been done over various emails.

Mutuality of Obligations

However, to fully understand the situation, we would need to review the details of the current agreement and any related correspondence or documents. It may be that the increased hours are a solid contractual commitment and have to be honoured. Or it may be that all hours under the agreement are only offered on an ad hoc basis, contractually-speaking.

This all creates an issue of mutuality of obligations and this obligation to provide or receive work, including at set hours, could indicate an employer-employee relationship. And that would have undesirable tax implications.

Further unhelpful actions to demonstrating your commercial status

Similarly affecting the tax status of the role, the client appearing to have moved you from a retainer basis where you likely managed your tasks and timetable yourself, to now imposing on you a fixed 9-5 timetable, is unhelpful to your position as a commercial supplier.

This transfer raises the prospect that your role may not meet HMRC’s criteria for a bonafide self-employed freelance opportunity, and so you could be caught by IR35.

For your consideration – reform, a range of factors, and risk

In play where a worker provides their services through their own limited company or another type of intermediary to the client, IR35 was reformed on April 6th 2017 in the public sector and on April 6th 2021 in the private sector.

Whether or not you are subject to IR35 will depend on several factors, such as the nature of the assignment, the size of the client, and how you are providing your services.

For example, if you are working through an intermediary, such as a personal service company, a partnership, or as an individual, there may be an IR35 risk, depending on the qualification of the role and whether you want to be taxed on a PAYE basis.

The IR35 off-payroll rules ensure that workers who would have been an employee if they were providing their services directly to the client pay broadly the same Income Tax and National Insurance contributions as employees.

Specific projects are preferable to be genuinely self-employed

Usually, freelancers in business on their own account working outside IR35 have several clients to diversify their income, or they work on specific projects rather than accepting treatment that would befit an employee.

In reality, in both workplaces and with remote working like yours, the outside-inside IR35 line can become blurred.

Related, your concern about your ability to take on other clients, because you fear daily checks mean you’ll be restricted on getting started on other customers’ projects, is understandable.

Moving forward…

Freelancers often encounter a range of challenges, from navigating complex legal and tax requirements to managing irregular workloads.

Seeking professional advice is therefore vital to ensure that you are treated fairly and comply with the law.

In your case to address these issues, we believe it would helpful if you sought advice from a lawyer and an accountant.

Why two advisers (will be better than one in your situation)

A lawyer could review the contract to determine what, if any, recourse you have regarding the hours worked; and an accountant could provide guidance on both your potential tax implications as a freelancer and whether or not you are subject to IR35.

A legal adviser specialising in IR35 or an employment status adviser would also offer you tailored guidance on keeping your contract and working practices outside IR35.

By understanding your rights and obligations as a freelancer, you can ensure that you are well-equipped to tackle any challenges that come your way. Good luck!

The expert was Maude Lindfelt of Gerrish Legal, a commercial legal advisory to freelancers, contractors and the self-employed.