The days of employees working nine to five are no longer the way to make a living. Advances in technology have changed things rapidly, and many companies are now actively choosing to engage a more flexible workforce, often made up from a mixture of employees, self-employed contractors and agency workers (to name but a few) engaged under many different types of contracts. These individuals can now work just as effectively from a variety of locations and enjoy flexible hours to boot.

A flexible workforce has many advantages, but can also create challenges for a business that are difficult (but not impossible!) to navigate. So what are those challenges and what can be done to overcome them?

Know your workforce

One of the most beneficial exercises to undertake as a business engaging a flexible workforce is to carry out a personnel review. Understanding how each individual is engaged (and what this means in terms of their legal rights) will allow the business to understand how each individual should be managed.

The distinction between employees, workers, consultants and self-employed contractors is an important one.  Workers have legal entitlements whereas self-employed individuals do not – like the right to 28 days’ paid holiday each year, to be paid the National Minimum (or Living) Wage, to be enrolled in a pension scheme and to statutory sick pay. Employees enjoy even greater rights, including the right not to be unfairly dismissed (after two years’ continuous service).  Getting this assessment wrong can be an expensive mistake for an employer.

Knowing how an individual is engaged from the outset, and ensuring that their manager understands the arrangements, will put the business on the right foot from the starting block. Saying that, it’s not always an easy assessment to make, but issues are less likely to arise if managers ensure that each member of their workforce is appropriately categorised and engaged under an appropriate agreement. For example, if a “self-employed” contractor will be required to provide personal service to the business on a regular basis for an unfixed duration and notice has to be given to terminate the arrangement, it may be that they are actually a worker. If so, the contract should provide for holiday and statutory sick pay entitlement so as to avoid problems arising later on.

Consider the reality of the arrangements

Identifying an individual’s employment status is only the start. There have been various cases before the courts recently (most notably those involving Addison Lee and Uber drivers) where individuals who have been categorised as self-employed in a written agreement have later been found to be workers due to the changing nature of the arrangements.

As such, it is important to ensure that the arrangements in place reflect the written agreement as far as possible. For example, where a genuinely self-employed contractor is working alongside employees and agency workers on a specific project, it can be easy to treat them all in the same way, but managers should take care not to blur the lines. Whilst, after 12 continuous weeks with the business, an agency worker will be entitled to the same basic rights as an employee, giving a self-employed contractor those rights may unintentionally give them worker or employee status, regardless of what their written agreement says.

Similarly, whilst it’s important not to completely exclude self-employed individuals, care should be taken not to integrate them into the business.  Whilst giving them a business email address and requiring them to wear a company uniform might be commercially attractive, the individual may use this to challenge their employment status when their engagement comes to an end.

If, over time, the arrangements change, it is also important to update the contractual arrangements so that the business has all of the necessary protections in place, should it need them.

One size doesn’t fit all

Unfortunately, there is no “one size fits all” when it comes to working out an individual’s employment status and the steps that should be taken to ensure that the arrangements in place reflect the business’s intentions. However, businesses can put themselves in the best possible position by equipping managers with knowledge about the different types of employment status and the rights that each relationship attracts, so that they can ensure compliance and minimise the chances of disputes arising.

Victoria Albon is an associate at Dentons.