Are freelancers entitled to employment rights?

The freelance workforce is rapidly on the rise with around 4.3 million self-employed workers in the UK -- that’s approaching 15 per cent of all UK workers.

While freelancing offers flexibility and autonomy, it's important for both freelancers and their employers -- the freelancer’s clients (the ‘engagers’) -- to understand the employment rights that freelancers are entitled to under UK law.

So let’s explore the key rights and protections that freelancers both enjoy and go without, under the UK's (current) legal framework, writes Zeeshan Anwar, head of compliance at Dolan Accountancy.

As a freelancer, your employment status affects your legal protection at work and impacts what employment rights you’re entitled to. If you’ve recently made the move to freelance or contract work, you might be wondering how your employment rights have been affected.

There are three main types of employment status under employment law (Employment Rights Act 1996):

• Employee

• Worker

• Self-employed

Contractors are often self-employed but can have the employment status of a ‘worker.’ Or, if the contractor works on behalf of a client but is employed by an agency (or through an umbrella company), they’ll have the employment status of an ‘employee.’

Your rights as a freelancer

Most freelancers tend to work as their own boss and so aren’t covered by employment law in most cases. As a result, things like sick pay and legal protection under company schemes don’t apply to freelancers.

Despite this, you have legal rights at work, whether you’re an employee, worker, freelancer or contractor. These rights include:

• Health and safety protection

• Protection against discrimination in the workplace

• Being legally protected by the terms of the contract with your client

• The right to a safe working environment

What employment rights are freelancers not entitled to?

With all the benefits of being self-employed, it’s important to understand that certain employee benefits will no longer apply, including the following:

Sick pay

Statutory Sick Pay (SSP) is paid by an employer when an employee is unable to work due to illness. If you work for yourself, you don’t have an employer so you can’t claim sick pay.

However, if you find yourself unable to work due to sickness while being self-employed, you may qualify for the ‘new style’ Employment and Support Allowance (ESA). This depends on whether you’ve made enough national insurance contributions in the last two to three years.

Annual leave

Those who are self-employed don’t have any right to annual leave. However, depending on the nature of your work/contract, you may be given annual leave. For example, if you work via an agency or umbrella company as a contractor, you could be given an annual leave allowance based on the length of your contract.

Those self-employed workers who aren’t entitled to annual leave -- often those contracting via a limited company -- can still take a holiday whenever they wish, but they won’t be paid for the days they aren’t working.

Parental leave

Statutory Maternity Pay, Statutory Adoption Leave and Statutory Paternity Pay are all paid by employers, so self-employed workers aren’t entitled to any of these benefits.

However, self-employed women who are unable to work after having a baby may qualify for Maternity Allowance. You can access this allowance for a total of 39 weeks if in the 66 weeks before your baby’s due you’ve:

• Been self-employed for at least 26 weeks

• Been earning at least £30 a week

Minimum pay

When you’re self-employed, you work as your own employer. This means you set your own wages and aren’t entitled to the National Minimum Wage.

You might have your own personal ‘rules’ of minimum pay you’d accept from a client, but you aren’t entitled to a minimum amount. It’s up to the client what they pay you and it’s up to you whether you accept.

Working time rights

The Working Time Regulations 1998 set a limit on the number of hours an employee can work in a week and what breaks they are entitled to within those hours. As a self-employed worker, you set your own working hours and so are exempt from any working time rights.

Umbrella company versus self-employment rights

If you work with an agency or as a contractor, then you have the option of working through an umbrella company. This means you will be an employee of the umbrella company and so, you gain the rights of a regular employee.

The umbrella company pays you as their employee, so the hassle of chasing clients for money is no longer a problem. As a contractor, you’ll sign a contract of employment with the umbrella company which entitles you to the following benefits:

• The umbrella company will on your behalf deduct Income Tax and employee National Insurance contributions due under PAYE (Pay As You Earn) from your pay

• Statutory Maternity and Paternity Pay

• Statutory Sick Pay

• Pension scheme enrolment

• Annual leave

• National minimum wage

• Working time regulations

It’s horses for courses, but if rights matter to you seek tailored advice…

Working as a freelancer or contractor theoretically gives you a great deal of freedom to earn as much or as little as you like; set your own hours and only work on projects and for clients you’re passionate about. With a limited company formed, you will need to consider and navigate the IR35 regulations or off-payroll working rules however, and these are widely considered to be the greatest trade-off to the tax efficiencies which limited company contracting still offers.

However, as self-employed for tax purposes, you’ll lose plenty of employment rights in the process. Although they are currently unregulated, this is where umbrella companies come into their own, as they are able to offer contractors some flexibility with their work as well as statutory rights which limited company directors invariably go without. If rights and protections matter to you, consult an adviser or accountant who specialises in the freelance sector to see how you can maximise your entitlements.