Off-payroll working rules – IR35

The off-payroll working rules can apply if a worker (sometimes known as a contractor) provides their services through an intermediary. An intermediary will usually be the worker’s own Personal Service Company (PSC), but could also be any of the following:

  • a partnership
  • a managed service company
  • an individual

The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.

These rules are sometimes known as ‘IR35’.

The off-payroll working rules currently apply to intermediaries providing workers to public sector clients. From April 2020, the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules apply will move to the organisation receiving the individual’s services.

You may be affected by these rules if you are:

  • a worker who provides their services through their intermediary
  • a client who receives services from a worker through their intermediary
  • an agency providing workers’ services through their intermediary

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.

Who the rules apply to.

In addition to all public sector clients, from 6 April 2020 the rules will also apply to all medium and large-sized private sector clients (including charities) that meet 2 or more of the following conditions:

  • has an annual turnover of more than £10.2 million
  • has a balance sheet total of more than £5.1 million
  • has more than 50 employees.

Statutory Updates

  • The Agency Workers ( Amendment) Regulations 2019 will amend the Agency Workers Regulation 2010) to revoke the ‘ Swedish derogation’ which excludes agency workers from the right to the same pay as directly recruited workers of the end user if they have a contract of employment with the agency.
  • All termination payments above the £30,000 threshold will be subject to class 1A National Insurance contributions (employer liability only).
  • The Employment Rights Act 1996 will be amended so that all workers will have the right to a written statement of terms of employment that commences on or after that date. The statement will need to be given to the employee not later than the first day of the employment.
  • The Working Time Regulations 1998 will be amended to increase the reference period for determining an average week’s pay (for the purposes of calculating holiday pay) from 12 weeks to 52 weeks.

Is Ethical Veganism a protected belief under the Equality Act 2010?

Yes, held the Employment Tribunal at a Preliminary Hearing in the case of Casamitjana Costa v League Against Cruel Sport

Religion or Belief is one of the nine protected characteristics covered by the Equality Act 2010 and offers protection against discrimination (direct and indirect), harassment or victimisation as a result of a person’s religion or belief.

Guidance was given as to what would qualify as a philosophical belief in the case of Grainger plc v Nicholson.  This guidance suggests that in order to be able to have protection offered under the Equality Act a tribunal should consider the following test:- 

  • Be genuinely held.
  • Be a belief and not an opinion or viewpoint based on the present state of information available.
  • Be a belief as to a weighty and substantial aspect of human life and behaviour.
  • Attain a certain level of cogency, seriousness, cohesion and importance.
  • Be worthy of respect in a democratic society, not be incompatible with human dignity and not conflict with the fundamental rights of others.


The full merits hearing of this case is being heard in the Watford Employment Tribunal at the time of preparing this case update, (from 24 February to 6 March 2020) so the particular facts relating to the substantive claim are awaited. What we do know is that following his dismissal, the claimant brought claims for direct and indirect discrimination, harassment and victimisation based on his belief in ethical veganism. His dismissal arose because of the objections he had made into the company’s pension fund, as he believed these were unethical investments made in companies that harmed animals. As a result, the claimant arranged to have his investments moved to alterative more ethical funds. He then sent emails to his colleagues telling them what he had done and giving his personal view on the company’s investments. His employer dismissed him for gross misconduct on the basis that his email to colleagues was sent giving financial advice in spite of his employers express and repeated instructions not to do so.

The issue of whether ethical veganism was a philosophical belief under the Equality Act 2010 was considered at the preliminary hearing. Although the respondent conceded that ethical veganism could amount to a philosophical belief, the tribunal reviewed the evidence and applied the test that is set out above. 


The tribunal held that the claimant’s belief was genuinely held and was more than an opinion or viewpoint. It had a weighty and substantial effect on his everyday life and behaviour. The claimant only worked in the field of animal protection and avoided relationships with non-vegans. Further, he ate a 100% vegan diet, avoided foods that could potentially harm animals in their production, such as figs, and would not allow any food or product containing animal products into his home. He avoided using products tested on animals, wearing animal-derived products, using financial products, which invested in companies that carried out animal testing, or using bank notes manufactured using animal products. He would always choose to walk rather than used public transport for journeys under one hour to avoid accidental crashes with wildlife.

The tribunal held that ethical veganism was a belief that obtained a high level of cogency, cohesion and importance. Philosophically, it is rooted in the ancient concept of ahimsa (“not to injure”), an important tenant of Jainism, Hinduism and Buddhism. There was no conflict between veganism and human dignity and ethical veganism did not in any way offend society or conflict with the fundamental rights of others.


Prior to this case there had been a narrow approach taken by the Employment Tribunals as to what was a belief, even as recently as  September 2019 in the case of Conisbee v Crossley Farms Ltd and others vegetarianism was rejected as a belief by the tribunal. Vegetarianism was described by the Employment Tribunal in this case as a ‘lifestyle choice’ and that vegetarianism does not have a similar status or cogency to religious beliefs.

As this case is decided in the employment tribunal it is not binding on other employment tribunals but it is clear that in any future legal claim, a tribunal must assess the particular facts of the case and the claimant’s evidence of their belief. While this case does not mean that all ethical vegans will be able to complain of discrimination. It does heighten awareness of the scope for challenge and, following this case, there is now potential for a wider interpretation of what a belief is under the Equality Act 2010.  Employers may now see more discrimination claims being brought relating to this particular, or indeed, other novel philosophical beliefs. We shall have to wait and see. 

Did installing covert CCTV to monitor workplace theft violate an employee’s Article 8 privacy rights?

  • Article 8(1) of the European Convention on Human Rights (ECHR) states, “everyone has a right to respect for his private and family life, his home and his correspondence.” However, this is not an absolute right. Article 8(2) provides that a public authority shall not interfere with the exercise of the right to privacy “except such as is in accordance with the law and is necessary in a democratic society:
  • In the interests of national security, public safety or the economic well-being of the country.
  • For the prevention of disorder or crime.
  • For the protection of health or morals.
  • For the protection of the rights and freedoms of others.”

Balancing the conflicting demands of a community with the protection of an individual’s fundamental rights has given rise to a host a number of cases involving monitoring in the workplace. In this case, Lopez Ribalda and others v Spain, the Grand Chamber of the European Court of Human Rights (ECtHR) decided that the employees Article 8 rights were not violated.


Ms López Ribalda together with  four other applicants worked as cashiers at a supermarket chain MSA.  In June 2009, the manager of the supermarket discovered significant stock discrepancies. In order to investigate this, they installed CCTV cameras in the supermarket. The cameras aimed at identifying possible thefts by customers were visible. However, other cameras, aimed at recording possible thefts by employees at the cash desks, were not visible. Signs were put up in the supermarket to indicate that CCTV was in use but employees were not specifically told about the cameras.  

Shortly afterwards, Ms López Ribalda and her colleagues were caught on video stealing items or helping co-workers and customers to steal items. Five employees admitted involvement in the thefts and were dismissed. All five of the employees brought unfair dismissal claims, arguing that the surveillance had been unlawful. The claims were dismissed by the Spanish employment tribunals and again on appeal by the High Court of Catalonia.

The tribunal and High Court held that the covert video surveillance had been lawfully obtained even though prior notice had not been given to the employees. The High Court accepted that the surveillance had been justified by the employer’s reasonable suspicion of theft, had been appropriate to the legitimate aim of detecting theft, and was necessary and proportionate.

In their claims against Spain before the European Court of Human Rights  the employees complained that the use of footage taken from the covert video surveillance in the unfair dismissal proceedings had breached their right to privacy under Article 8 of the ECHR and the use of the footage in their unfair dismissal proceedings had infringed their rights under Article 6 of the ECHR, the right to a fair trial.


The ECtHR decided that the Spanish courts had failed to strike a fair balance between the rights involved. It held that the covert video surveillance in this case was targeted not at particular individuals but at all the staff working on the supermarket’s cash register, over a period of weeks, without any time limit and during all working hours. The decision to install covert surveillance had been based on a general suspicion against all staff in view of the stock irregularities.

Spain applied for the case to be referred to the Grand Chamber of the ECtHR for a re-hearing.

The ECtHR, sitting as a Grand Chamber, held that there had been no infringement of the Article 8 right to privacy (overturning the chamber decision).  In reaching its decision that the CCTV monitoring  in this case was necessary and proportionate, the court took into account the following factors:

  • The lower courts had found that the employer’s suspicion of theft meant that the employers had a legitimate interest for the CCTV surveillance.
  • The monitoring took place in an open and public area where an employee would have a low expectation than they would in places such as a toilet or cloakroom where a total ban on CCTV may be justified.
  • The employers stopped the recording once the culprits had been identified, the recording only lasted for 10 days and was not considered excessive.
  • Only the manager of the supermarkets, its lawyer and a union representative saw the CCTV recordings before action was taken, it was not used by the employer for any purpose other than to investigate the thefts.
  • The domestic court also found there were no other means to fulfil the aims pursued and so this measure should be regarded as necessary.

It agreed with the chamber decision that there had been no infringement of the Article 6 right to a fair hearing.


The case follows what many employers will welcome as a common-sense approach to the use of covert monitoring as part of a targeted investigation, where the covert nature of the surveillance is an essential part of it. However, it is by no means a green light to blanket surveillance. In the UK, guidance published by the Information Commissioner’s Office states that it will be rare for covert monitoring of employees to be justified and that it should only be done in exceptional circumstances, for example, as part of a specific investigation into suspected criminal activity. It is therefore advisable for employers to maintain a strict policy that covert video surveillance will only be carried out in exceptional circumstances where the employer reasonably believes that there is no other less intrusive way of dealing with the issue. Where covert monitoring is undertaken, it should be done for the shortest possible period and affect as few individuals as possible.

Annual Leave FAQ’s

We often receive queries from clients about annual leave problems. In this issue of our Employment Update, we answer your most frequently asked questions.

Q1. I have an employee who is off on long-term sick leave are they able to carry over their unused annual leave to the next annual leave year?

The short answer to this is yes. The European Court of Justice (ECJ) has ruled that a worker on long-term sick leave who is unable or unwilling to take statutory annual leave may be permitted to carry over that leave into a subsequent year. As to how long they can carry this over for, following a series of cases dealing with this very issue  it now seems likely that 18 months ( from the end of the relevant leave year) will be adopted by employers as a sensible period of carry over when an employee is on long term sick leave.  

Q2. I have a number of employees who at the end of each annual leave period have not used all of their holiday entitlement. Do I have to remind them that they should take this time off or will it lapse?

The recent ECJ cases of Max-Planck Gesellschaft zur Forderung der Wissenscheaften eV v Shimizu and Kreuziger v Berlin, which were decided at the same time, highlighted the need for employees to be given an effective opportunity to take their annual leave. As a result, it is for an employer to show that they have warned their employees that they should take any outstanding leave, to avoid the risk of losing that leave at the end of the annual leave year.

The ECJ in the above cases pointed out that as the employee is the weaker party in the employment relationship, the employer must not restrict their rights.  In particular, they should not be deterred from exercising their right to take annual leave by the possibility of suffering detrimental consequences, nor should they be offered any incentive or encouragement not to take their leave. 

In order for an employer to show that it has met its obligations, the ECJ recommends that the employer should take positive steps to encourage employees to take annual leave such as ensuring employees have the opportunity to take their annual leave, even if you have to encourage them formally. Make sure you inform employees in good time, and in writing as evidence, that if they do not take their annual leave when it is coming to the end of the period for them to do so.  Ensure you have a clear “use it or lose it” policy, that there is a clear procedure for booking annual leave and that everyone is aware of this procedure. 

Q3. I have an employee who has been off on sick leave for 8 months. They have accrued a large amount of annual leave and have asked me if I can make a lump sum payment to them in lieu of the holiday. Can I make this payment?

Payments in lieu of annual leave are not allowed to be made during employment. Statutory holiday entitlement cannot be replaced by a payment in lieu, other than in circumstances where an employee’s employment is terminated (Regulation 13 (9) WTR). Therefore, it would be a breach of this legislation to pay the employee rather than allow them to take their annual leave.

The other option of course is to given the employee the choice to take the annual leave while they are on sick leave and then he will be paid for it. However, this is only really worthwhile if the employee is not getting sick pay.

Q4. I want to reward employees with long service with additional days annual leave but I am concerned that this may indirectly discriminate against younger employees who do not have established length of service and so will not be entitled to the same benefit. Can I do this?

Having an arrangement where employee’s annual leave entitlement increases with length of service is not unusual. These arrangements are usually contractual and work with an employee having a certain level of leave, which increases after say 5 years. Although these arrangements are common, could they be indirectly discriminatory on the grounds of age?

Age discrimination in employment is prohibited under the Equality Act 2010. Therefore, an employer must not (without justification) discriminate (directly or indirectly) against an employee because of age in respect of their terms of employment or by subjecting them to any other detriment. Indirect discrimination could arise if an employer’s increases annual leave for longer serving employees. If an employee’s contract provides that annual leave will increase after ten years’ service for example, this may be indirectly discriminatory because younger employees are much less likely than older employees to have ten years’ service, the longer the service required then the greater the chances of younger employees being at a disadvantage.

Schedule 9, Paragraph 10 of the Equality Act 2010 contains an exception to deal with this very issue to allow employers to reward length of service, even if it does disadvantage younger employees. This exception enables employers to treat employees differently with respect to awarding benefits if the reason for the difference in the treatment is that the disadvantaged employee has less than five years’ service. In respect of employees who have more than five years’ service and are put at a disadvantage by the service requirement, then an employer has to show that it ‘reasonably appears’ to it that imposing the length of service requirement  ‘fulfils a business need.’ In these circumstances the requirements to objectively justify such practice are less onerous that in most other cases of indirect discrimination.

Q5.  If an employee suffers a bereavement, do I have to give them time off work or can I make them take some bereavement leave from their annual leave entitlement?

At present, there is no right to take paid time off due to a bereavement. Many employers will have their own compassionate leave policy to govern the issue of the time off that can be taken do deal with this. If the time off required exceeds that which is provided for by the policy then you will have to consider this on a case by case basis. Everyone deals with grief differently. Be mindful of the longer-term consequences following the trauma of the death of a loved one. Mental Health issues such as depression and PTSD can be long term medical problems and may amount to a disability under the Equality Act 2010. Be compassionate and see what you can do to support an employee on their return to work following a bereavement, perhaps you can offer flexible working or a phased return to work.

From 6 April 2020, however this is going to change in some cases with the introduction of the Parental Bereavement Pay (General) Regulations 2020.  This means that an employee who loses a child under the age of 18, or suffers a stillbirth after 24 weeks of pregnancy, will be entitled to two weeks’ statutory leave to be taken in one block or as two separate blocks of a week. The leave will be paid for employees who have at least 26 weeks’ service and who meet minimum earnings criteria. Statutory parental bereavement pay will be paid at the same rate as statutory paternity pay (£151.20 from April 2020) or 90% of weekly earnings if lower.  

Q6. I have received a request for annual leave from an employee, at what is my company’s busiest time of my year. I would therefore normally refuse such a request. However, their request relates to the employees requirement to observe a religious festival. What should I do?

There is no legal requirement for an employee to give a reason why they want to take a holiday. However, if they do state that the reason they wish to take their annual leave relates to a religion and belief, and permission is refused, then, as an employer you must be able to justify your decision by reference to reasons unrelated to the employer’s religion or belief. In other words, any refusal must be a proportionate means of achieving a legitimate aim. Discrimination (either direct or indirect) and harassment in the workplace because of religion or belief is unlawful under the Equality Act 2010. Having a clear policy in place in respect of the timings of holidays and the processing of holiday requests will assist you in these situations.  

Expert comment: Bullying and harassment in the workplace

With workplace bullying and harassment being a hot topic in the workplace, Senior Associate in our Employment department, Hayley Trovato, has commented on what employers can do to combat it:

Both bullying and harassment can often be hard to recognise and the symptoms may not be obvious to others. If you are the person on the receiving end you may think that this is normal behaviour for the company you work for and you simply cannot handle the pressure, or you may feel anxious that you will be considered weak or not up to the job if you speak out and say you find the behaviour of others intimidating. A common theme in people not coming forward and reporting bullying is that they will be accused of overreacting and they worry that no one will believe them. There is also a fear of what the consequences may be for them if they do raise a complaint.

Bullying at work can take many different forms and can happen face to face, in writing by email or letter or over the phone.

It can be characterised as offensive, intimidating, malicious or insulting behaviour, an abuse or misuse of power through means that undermine, humiliate, denigrate or injure the recipient.

There is a lot of talk about ‘ banter ‘ and where the line should be drawn between banter and insulting behaviour; or between robust management and abuse of power; or where someone with a strong personality becomes intimidating.

In terms of the law, there is much uncertainty as there is no legal standard for bullying within employment legislation.  Unless bullying is related to a protected characteristic and amounts to conduct defined as harassment under the Equality Act 2010 then it is not possible to make a complaint to the Employment Tribunal about it.

Tackling bullying behaviour before it becomes a problem is key. Here are some practical steps that employers can take to tackle the bullies head-on:-

  • Provide training to employees and managers so everyone is aware of their own rights and responsibilities.
  • Lead by example – how employers lead sets the tone for how employees are expected to treat each other.
  • Have a zero-tolerance policy making it clear what behaviour is unacceptable, make sure this policy is widely publicised and applied consistently.
  • Ensure that there is a clear reporting channel for employees to raise concerns and what steps you will take to ensure what you will do to safeguard against potential victimisation following any complaints.
  • investigate all complains promptly and fairly
  • Promote a positive and open workplace culture

This article is for information only and does not constitute legal advice. For professional legal advice on employment matters around bullying in the workplace, please contact Hayley Trovato.