What's in a name? That which we call an employee by any other name would fulfil the same role
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“I am making your employment position redundant; however, I could offer you a consultancy role…..”
In such circumstances, the employee will be able to bring proceedings as long as he has one year’s continuous employment. He will be able to claim that his redundancy is unfair as his role is still in existence, in demand, and has not therefore been made redundant. If there is a need for a consultant to undertake the role, the question must be asked as to why there is the not a need for the employee to do the same work. |
With redundancy programmes still in full swing across the country, the onus is on employers to engage in meaningful consultation and consider all options for suitable alternative employment in order to retain the employee where possible. Alternatives could include a different role within the organisation, or a reduction in pay, commission, or hours, in order to avoid the redundancy.
Some employers wrongly consider that offering employees consultancy positions is a suitable alternative to redundancy. For most employers who have not taken legal advice, this involves terminating the employment relationship, but having the same role being undertaken by the same person under the same conditions - with the only difference being that they are no longer classed as being an employee by the employer.
In the vast majority of cases, offering a consultancy position is not considered suitable alternative employment, as a consultant is not an employee, but rather someone who is self-employed and renders services.
Self employed consultants are responsible for their own tax and expenses, usually work from their own premises, have their own business cards and can provide a substitute if they are not able to attend work. Consultants provide their own equipment, and can also work for other organisations. They are not party to the employment handbook or employer training and can undertake the work for a fixed price regardless of how long the job can take.
If a former employee is made a consultant, but does not have the above-mentioned obligations or responsibilities, and continues with the employment relationship as before, they are not a consultant, regardless of their consultancy title and tax status.
When the courts are evaluating the employee status, they consider the overall effect of the relationship as well as the above list, and have tended to disregard the intention of the parties when factors clearly indicate the existence of an employment relationship.
An employee who is made redundant and does not sign away his rights to sue his employer by way of compromise agreement will be able to argue the dismissal was unfair in an Employment Tribunal as the position was not redundant at all. The current maximum award for unfair dismissal cases is £66,200; however, it may not only be the courts that penalise for making this decision. Her Majesty’s Revenue and Customs provides very clear guidance on the distinction between an employee and a consultant and those who attempt to circumvent these guidelines may find themselves with a hefty tax bill and maybe even a fine.
For advice about suitable alternative positions for redundancy and any other employment law matters, please contact our employment team:
Nicholas C J Lakeland: ncjl@silvermansherliker.co.uk
Martin D Donoghue: mdd@silvermansherliker.co.uk
Victoria J Russell: vjr@silvermansherliker.co.uk
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