Subcontractor Rights

Does Being Self-Employed or CIS Registered Remove Your Subcontractor Rights?

No. Being described as self-employed or registered under the Construction Industry Scheme does not conclusively determine your employment status.

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CIS primarily concerns the tax treatment of payments made within the construction industry.

Employment status for statutory rights is a separate legal question.

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A Tribunal will consider the reality of the working arrangement, including whether:

• you were required to perform the work personally;

• you had a genuine right to send a substitute;

• the contractor controlled when, where and how you worked;

• you operated an independent business;

• the contractor was genuinely your client or customer;

• you carried financial risk;

• you worked as part of the contractor’s organisation; and

• you depended on the contractor for regular work.

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You may therefore be treated as self-employed for tax purposes while still qualifying as a worker for certain employment rights.

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The Dominant Purpose Test and Your Subcontractor Rights

Working under the label of a subcontractor does not automatically mean that you are genuinely self-employed.

What matters is the true nature of the relationship. If you are expected to perform the work personally, follow the contractor’s instructions and operate as part of its business, you may qualify as a limb (b) worker and have statutory subcontractor rights.

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In James v Redcats (Brands) Ltd [2007] ICR 1006, the Employment Appeal Tribunal considered the dominant purpose of the contractual relationship.

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The relevant question is whether the arrangement was principally for the provision of your personal work or services, or whether you were genuinely running an independent business and supplying services to the contractor as your client or customer.

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The Tribunal will look beyond descriptions such as:

• self-employed;

• subcontractor;

• independent contractor; or

• CIS registered.

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It may examine:

• whether you were required to perform the work personally;

• whether any right of substitution was genuine;

• the degree of control exercised by the contractor;

• whether you were integrated into the contractor’s business;

• whether you dealt with the contractor as a customer of your own business; and

• whether you carried genuine financial and commercial risk.

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Where the dominant purpose of the arrangement was to obtain your personal labour rather than purchase services from an independent business, you may still qualify for worker protections despite the label used by the contractor.

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Does a Right of Substitution Remove Your Subcontractor Rights?

A contractor may argue that you are not a worker because your written or spoken agreement allowed someone else to perform the work.

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However, the existence of a substitution clause does not automatically remove your subcontractor rights.

In Pimlico Plumbers Ltd v Smith [2018] ICR 1511, the Supreme Court considered whether the dominant feature of the agreement remained personal performance despite a limited ability to pass work to another operative.

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The Tribunal will examine how any substitution right operated in practice.

It may consider whether:

• you were genuinely free to send another person;

• the contractor had to approve the substitute;

• you could choose any suitably qualified person;

• you could use only someone already accepted by the contractor;

• substitution ever occurred in practice;

• you remained personally responsible for completing the work;

• you paid and managed the substitute yourself; and

• the contractor expected your labour rather than merely a completed commercial result.

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In Varnish v British Cycling Federation [2021] ICR 44, the Employment Appeal Tribunal confirmed that the dominant purpose or dominant feature of the agreement may be relevant when determining worker status. However, it is not decisive on its own and does not replace the statutory test under section 230(3)(b) of the Employment Rights Act 1996.

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The focus remains on the immediate purpose of the agreement and the reality of the working relationship.

If personal performance remained the dominant feature, a limited, conditional or theoretical substitution clause may not prevent you from having subcontractor rights.

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Are You Running Your Own Business or Integrated into the Contractor’s Organisation?

Being described as a subcontractor does not establish that you are genuinely operating an independent business.

The Tribunal may examine whether you marketed your services to customers generally or were instead recruited to work as part of the contractor’s organisation.

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In Cotswold Developments Construction Ltd v Williams [2006] IRLR 181, the Employment Appeal Tribunal distinguished between a person actively marketing services as an independent business and a person recruited to work as an integral part of another organisation.

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Relevant questions may include:

• Did you advertise your services independently?

• Did you maintain your own website, business pages or advertising?

• Did you negotiate work directly with different customers?

• Did you have your own customer base?

• Did you provide quotations and invoices?

• Could you freely accept or refuse work?

• Did you work mainly or exclusively for one contractor?

• Were you included in teams, rotas or site arrangements controlled by the contractor?

• Did you follow the contractor’s systems, procedures or reporting structure?

• Were you presented to customers as part of the contractor’s workforce?

• Did you carry responsibility for defective work and commercial losses?

• Could you increase your profit by organising the work efficiently?

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Actively marketing your own services, dealing with several customers and carrying genuine commercial risk may indicate that the contractor was a client or customer of your independent business.

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By contrast, regularly working within the contractor’s organisation, following its instructions and depending on it for work may support a finding that you were a limb (b) worker.

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Integration is relevant, but it is not a separate or decisive test on its own. The Tribunal will consider the entire working relationship.

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What Rights May a Subcontractor Have as a Worker?

A subcontractor who qualifies as a worker may have statutory rights including:

• paid annual leave;

• the National Minimum Wage;

• rest breaks;

• limits on weekly working time;

• protection from unlawful deductions from wages;

• protection against discrimination;

• protection from detriment for whistleblowing; and

• health and safety protections.

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Some rights apply only to employees rather than the wider category of workers. For example, ordinary unfair dismissal and statutory redundancy rights generally require employee status and may also require a qualifying period.

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The first question is therefore not simply whether you were called a subcontractor. It is whether you were genuinely self-employed, a worker or an employee.

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Can a Subcontractor Claim Holiday Pay?

Yes, if the subcontractor legally qualifies as a worker.

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A genuinely independent business is not entitled to statutory holiday pay from its customers. However, a person who undertakes to perform work personally and is not operating a business with the contractor as a client or customer may be entitled to paid annual leave under the Working Time Regulations 1998.

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A holiday-pay claim may arise where:

• no holiday pay was paid at all;

• holiday pay was calculated using only basic pay;

• regular overtime or other normal remuneration was excluded;

• holiday pay was incorrectly described as included in the daily rate;

• the contractor refused holiday because the individual was labelled self-employed; or

• accrued holiday was not paid when the relationship ended.

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Can a Subcontractor Claim the National Minimum Wage?

A subcontractor may be entitled to the National Minimum Wage if they qualify as a worker for minimum-wage purposes.

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A genuinely self-employed person operating an independent business is not entitled to the National Minimum Wage from a customer. However, a contractor cannot avoid minimum-wage obligations merely by describing someone as self-employed where the practical arrangement satisfies the statutory worker test.

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The Tribunal may examine the actual hours worked, payments received and deductions made when deciding whether minimum-wage arrears are due.

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Can a Subcontractor Claim Unlawful Deductions?

A subcontractor who qualifies as a worker may be able to bring an Employment Tribunal claim for unlawful deductions from wages.

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This may include:

• unpaid wages;

• underpayment of an agreed daily or hourly rate;

• unauthorised deductions for materials, transport or accommodation;

• withheld holiday pay;

• deductions for alleged damage without contractual authority;

• unpaid overtime; or

• money retained after the working relationship ended.

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A genuinely self-employed subcontractor would normally pursue unpaid sums as a contractual debt rather than as an unlawful deduction from wages.

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The correct legal route therefore depends on status and on the nature of the payment.

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What Evidence Can Prove Subcontractor Worker Status?

Employment status is determined from the complete relationship rather than one document.

 

Relevant evidence may include:

• written contracts;

• spoken agreements;

• text messages and WhatsApp communications;

• site instructions;

• work rotas and timesheets;

• payment records;

• CIS statements;

• invoices;

• photographs from the site;

• evidence of supervision;

• instructions about working hours;

• requests for permission to take time off;

• evidence showing whether substitution was allowed;

• evidence of who supplied tools and materials;

• communications describing you as part of a team;

• company uniforms, identification or email accounts;

• evidence of financial risk; and

• evidence showing whether you worked for other customers.

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Evidence showing what happened in practice may be more important than labels used in the written agreement.

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How Can You Enforce Your Subcontractor Rights?

The correct route depends on whether your claim concerns statutory worker rights, commercial payment rights or both.

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Possible steps include:

1. reviewing the written and spoken agreement;

2. identifying your true employment status;

3. calculating unpaid wages, holiday pay or minimum-wage arrears;

4. preserving messages, payment records and site evidence;

5. raising the issue formally with the contractor;

6. starting ACAS Early Conciliation for an Employment Tribunal claim;

7. sending a letter before action for a commercial debt;

8. considering adjudication where a qualifying construction contract applies; and

9. issuing proceedings before the applicable limitation period expires.

 

Employment Tribunal time limits are usually short. Many claims must ordinarily be started within three months less one day of the act complained of, subject to the effect of ACAS Early Conciliation.

Commercial debt and construction claims may follow different procedures and limitation periods.

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Frequently Asked Questions About Subcontractor Rights

Do I Have Any Rights as a Subcontractor?

Yes. Your rights depend on your true employment status and the type of agreement under which you work.

A genuinely independent subcontractor normally has commercial rights arising from the contract, including the right to be paid for completed work.

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However, if you perform the work personally and are not genuinely operating an independent business with the contractor as your client or customer, you may qualify as a worker and obtain statutory employment protections.

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What Rights Do Self-Employed Subcontractors Have?

A genuinely self-employed subcontractor normally relies on commercial and contractual rights rather than ordinary worker rights.

These may include:

• payment under the agreed contract;

• recovery of unpaid invoices;

• contractual or statutory interest;

• payment-notice rights under qualifying construction contracts;

• suspension rights where statutory conditions are satisfied; and

• construction adjudication.

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The self-employed label is not conclusive. You may still qualify as a worker if the practical relationship satisfies the statutory test.

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Can a Subcontractor Have Employment Rights?

Yes. A person described as a subcontractor may legally be a worker or employee.

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The Tribunal will examine personal service, substitution, control, integration, financial risk and whether the contractor was genuinely a client or customer of the subcontractor’s business.

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Does Being CIS Registered Mean That I Am Self-Employed?

No. CIS registration concerns tax administration within the construction industry and does not conclusively determine employment status for statutory employment rights.

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You may be CIS registered and still qualify as a worker.

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Does a Substitution Clause Mean That I Have No Subcontractor Rights?

No. The Tribunal will consider whether the substitution right was genuine and practical.

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A clause that existed only on paper, required the contractor’s approval or allowed only another contractor-approved worker may not remove the obligation of personal service.

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Can a Subcontractor Claim Holiday Pay?

Yes, if the subcontractor qualifies as a worker.

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A genuinely independent business cannot normally claim statutory holiday pay from a customer, but a worker may claim paid annual leave and unpaid holiday pay.

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Are Subcontractors Entitled to the National Minimum Wage?

Only where they qualify as workers for National Minimum Wage purposes.

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The contractor cannot avoid liability merely by calling a person self-employed where the true arrangement establishes worker status.

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Can a Subcontractor Claim for Unlawful Deductions?

Yes, if they qualify as a worker and money properly due as wages has been withheld or deducted without lawful authority.

A genuinely self-employed subcontractor would normally pursue the amount as a contractual debt.

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Can a Contractor Refuse to Pay a Subcontractor?

A contractor may dispute payment where there is a genuine contractual issue, such as defective or incomplete work. However, it must comply with the contract and any applicable statutory payment requirements.

The subcontractor may be able to challenge non-payment through negotiation, adjudication or court proceedings.

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Can a Subcontractor Stop Work If They Are Not Paid?

Potentially. A party to a qualifying construction contract may have a statutory right to suspend performance for non-payment after the final date for payment has passed and the required notice has been given.

Stopping work without following the correct procedure may create additional legal risk.

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Can a Subcontractor Use Adjudication?

A party to a qualifying construction contract generally has a statutory right to refer a dispute arising under the contract to adjudication.

Adjudication is often used for disputes concerning payment applications, valuations, variations, payment notices, pay less notices and final accounts.

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Do Contractors Get Employment Rights After Two Years?

Not automatically.

Two years of work does not convert a genuinely self-employed contractor into an employee. Employment status depends on the substance of the working relationship.

Some employee rights require a qualifying period, but worker rights such as holiday pay, minimum wage and protection from unlawful deductions do not generally depend on completing two years.

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What Is the 24-Month Rule for Contractors?

There is no general 24-month rule under which a subcontractor automatically becomes a worker or employee.

The expression usually relates to tax rules concerning travel expenses and temporary workplaces. It does not determine employment status.

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Can a Subcontractor Receive Statutory Sick Pay?

Worker status under section 230(3)(b) does not automatically establish entitlement to Statutory Sick Pay.

SSP has separate statutory eligibility rules and should be assessed independently.

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Can a Subcontractor Be Protected for Whistleblowing?

Yes. Statutory whistleblowing protection can extend to workers who make qualifying protected disclosures.

The available remedy may depend on whether the person is legally a worker or an employee.

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Still Not Sure About Your Subcontractor Rights?

Your contract, CIS registration or self-employed label may not reflect your true legal status. The answer depends on how the relationship worked in practice, including personal service, substitution, control, integration and whether you were genuinely operating an independent business.

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Get a free initial assessment of your working arrangement and find out whether you may have claims for holiday pay, National Minimum Wage arrears, unlawful deductions or other statutory worker protections.

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