Supervision, direction and control” are key factors in determining employment status. Summarising HMRC’s Employment Status Manual (ESM2055 – Agency and temporary workers), Contractor Calculator has a more succinct explanation – here.
The main problem that Bectu is seeking to get across to HMRC, and to employers, is that the answers to these questions look very different depending upon your point of view. An engager often overestimates the degree to which they supervise and direct their freelance workers. (In film and TV, the control question is a bit less of an issue as people are generally hired to work on a specific production).
There’s a very useful illustrative case – Staples v Secretary of State for Social Services (scroll down the page) – a chef who had a good deal of discretion about menus was deemed to show that he wasn’t under much supervision or direction from the management.
I summed this problem up to colleagues a few months ago thus (for reference):
There is a substantial asymmetry of understanding about freelance employment in the UK that is now coming to a head, with the potential to seriously damage the British economy.
The UK film and TV industry needs to grow rapidly at the moment. Per head of population, the UK is probably the world’s leading destination for TV and film production inward investment.
The skills gap is already yawning as the industry has never been as busy as it is at the moment, and the combination of CoViD non-returners, Brexit and a general poor retention / induction ecology means that those industries are already in crisis. This will get a good deal worse over the next two years with the UK set to double its studio capacity by the end of 2023.
The uneven bargaining environment and the ‘free rider problem’ that comes from relying on contingent (freelance) employment means that there is no realistic national training path to meet the vast skills gap that is opening up in film and TV, and the industry is a country mile away from having the kind of incentive structures that it will need to crew up and retain existing talent.
Most unions, and politicians also have their focus elsewhere. There is something of focus on ‘precariously employed workers’ – both from HMRC but also the trades union movement – which talks about ‘the gig economy’ in which people were deemed to working in ‘bogus self-employment’.
And it’s certainly a bad thing. Workers lose employment rights and reduce the amount of tax / employer NICs that they generate (without getting any of the personal benefits of ‘tax avoidance’). It’s an understandable union-ish concern on behalf of precariously-employed workers engaged by Uber, Deliveroo or Pimlico Plumbers who use these employment practices to avoid their obligations to employees, but also tax obligations (particularly Employer NI and pensions).
As such, this creates a race to the bottom as responsible employers can’t compete with gig economy employers.
However, the entertainment industry has almost the opposite problem – one that there is almost no understanding of in government circles, and no standard advice for from employment bodies like ACAS, or from the .gov website.
In this case, it’s almost a problem of ‘bogus employment’ where employers behave as though their employment relationship is one of ‘supervision direction and control’ (which is very important in terms of determining both employment and tax status), when actually it is much more one of dependence upon people who are, in reality, working as a business in their own right. The engagers think they’re the employers without taking many of the risks, responsibilities or obligations that employers do.
Employers in the entertainment industry often think that they employ people on an hourly rate, and their crew are under their supervision, direction, and control – taking no risks and not acting like a business that is supplying services. They think that the only difference is that they are on short fixed term contracts, but in most other respects, the relationship is similar to that of most other PAYE employee. The employers think they’re paying for hours.
However, the freelancers concerned know that this rate is only really a heuristic that determines their pay. In extreme cases, professional photographers have had to do campaigning to explain to people that they don’t just charge for the time they spend pointing their Nikon at things – they also provide a comprehensive before/after package that goes unnoticed.
In reality, freelancers know that the game they are involved in is a competitive one where they flatter employers into believing that they have the kind of expertise in place to provide supervision direction and control when the reality is that they don’t.
These freelancers will actually bring expertise, processes, experiences and skills to the table – acquired at their own risk, and they present them in such a way as to flatter their engagers. This is the reality of a competitive freelance job market. They will give employers a ready-made set of risk-management processes to mitigate things that could go wrong. You don’t just hire a worker – you often get management consultancy bolted on at no extra cost!
Often these freelancers know that – unless they do lots of pre-prep or unpaid work, or supply equipment (that they don’t rent to the employer) to manage risks that the employers don’t even realise that they have – they won’t be able to compete and keep their reputation to get re-hired. The employers, on the other hand, are either blissfully unaware of this, or they are even in a bit of denial about it.
We need to look at every job title and compare the engager’s view of what ‘supervision, direction and control’ they exert in comparison to the perception of the worker concerned. The workers will have a different view on this and – often – both HMRC and the employers have an understanding of this that is less accurate than that of the worker concerned.
Unfortunately, governments and HMRC find it easier to consult employers than they do to consult workers – and the result is often an inaccurate tax status, and a bargaining relationship that legitimises poor employment practices.