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When is a locum not self-employed?

31 August 2014

Almost all locums are treated as self-employed. This usually suits both them and the pharmacies that engage them, because the locums can treat certain expenses as tax deductible, they do not acquire unfair dismissal rights and there is a saving in National Insurance contributions.

The case of Wooler v Paydens, decided by Ashford Employment Tribunal at the end of last year, set alarm bells ringing in pharmacies across the country. Ms Wooler had a written contract entitled “Agreement for Services”.

She was described as a locum pharmacist, paid gross and made her own arrangements to pay income tax and NI contributions. On some occasions she chose not to work.

The Tribunal held that Ms Wooler was not an employee or self-employed, but that she was a worker and could pursue a claim for holiday pay. 

The Working Time Regulations 1998 (which deal with holiday pay and working hours) apply to employees and workers. Locums may even be employees with full employment rights.

The question of their status is a time bomb ticking away under many pharmacies.

In one South coast Employment Tribunal case the services of a superintendent pharmacist had been engaged through the superintendent’s company. The company invoiced the pharmacy for the superintendent’s fees.

There was a written contract for services between the pharmacy owner and the superintendent’s company, not a contract of employment. The superintendent paid her own national insurance and tax. When the parties fell out, the superintendent made a claim for compensation for unfair dismissal. 

The Employment Tribunal held that the superintendent was an employee and entitled to make a claim, while sympathising with the pharmacy owner that the superintendent was able to “have her cake and eat it”, and suggesting that the Revenue might wish to revisit her tax affairs.

There is a high risk that a pharmacist who works on a long term basis for the same owner or in the same pharmacy is not genuinely self-employed. Even if the pharmacist has paid tax, the owner is exposed to a claim by HMRC for employer’s NIC and penalties.

There are a number of factors that are taken into account when deciding whether a locum is an employee, worker or self-employed. Examples will be the extent of control that the owner has over the locum and whether the locum can chose to send another pharmacist to work in their place.

HMRC considers a locum is likely to be genuinely self-employed if he or she is:

  • engaged on a sessional or daily basis, and
  • performs only the statutory requirements of a pharmacist's job, which is essentially dispensing and supervision of the sale of P medicines, and advising on medicines for the treatment of common ailments.

On the other hand, HMRC is more likely to consider a locum is an employee if the locum takes over the full range of duties of an employed pharmacist which may include:

  •   supervision of staff more generally
  •   cashing-up, and
  •   re-ordering non-pharmacy stock such as perfumes, sunglasses, toothpaste.

HMRC considers a locum is probably self-employed if a standard NPA or PDA contract has been signed. The terms of any contract must be followed to ensure the arrangement is not a “sham”. 

However, standard contracts do what they say on the tin. They do not fit all circumstances and do not give the parties the rights that they should spell out, such as dealing with confidential information.

It is important that owners and locums set out their work arrangements in writing and that their contracts reflect what actually happens. Merely using labels “contract for services” or “self-employed” are not good enough. 

This article was written by David Reissner.

For more information please contact David on +44 (0)20 7203 5065 or david.reissner@crsblaw.com