It’s a common misconception that by engaging a self-employed contractor, all legal responsibilities rest with them. While contractors must obtain the correct permissions and provide evidence of compliance, the duty still lies with the engaging business to make sure everything is in order.
Failing to carry out proper checks can expose your business to serious risks – from civil and criminal liability to reputational damage – if issues arise around right to work, tax compliance, insurances, or licences. In fact, your organisation could be found complicit if a contractor breaks the law or causes an incident.
The Importance of a Contract for Services
One way to protect your business is through a robust Contract for Services.
This is a legal agreement between a business and a self-employed individual or independent contractor. Unlike a Contract of Employment, it does not create an employment relationship. Instead, it sets out the terms of engagement – including invoicing, fees, services, and crucially, the contractor’s responsibility to prove:
- Right to Work
- Tax Compliance
- Insurance and professional assurances
Think of it as a formal framework for engaging external talent in a compliant and transparent way.
Right to Work Checks
Right to Work checks are essential to reduce the risk of forced labour, exploitation, and trafficking. While the legal obligation to check employees is clear, the same is less explicit for the self-employed. However, as this group can be particularly vulnerable, businesses must still take precautions.
Engaging illegal workers can lead to:
- Business disruption
- Serious reputational harm
- Heavy fines
The safest approach is to follow the same process as outlined in your UK Border Agency Policy, as you would for any direct employee.
Tax Compliance
Tax compliance involves two key checks:
- Employment status for tax (IR35 and CEST tool)
Determining whether a contractor is genuinely self-employed can be complex. HMRC provides an online tool – the Check Employment Status for Tax (CEST) – which helps assess IR35 status. You’ll need details of:- The contract terms
- The worker’s responsibilities
- Who controls the work (how, when and where it’s done)
- Payment terms
- Whether benefits or expenses are included
If completed accurately, the outcome of the CEST assessment is generally respected by HMRC.
- Unique Tax Reference (UTR)
Every self-employed individual must be registered with HMRC and hold a UTR. This allows them to file a Self-Assessment in line with the Finance Act 2016 and Taxes Management Act 1970. For construction businesses, this is particularly relevant under the Construction Industry Scheme (CIS), which governs how tax must be deducted at source.
Insurance and Professional Assurances
Before engaging a self-employed contractor, you must also check they hold the appropriate insurances, such as:
- Public Liability Insurance
- Motor Insurance (where relevant)
- Professional Indemnity Insurance
- Product and Services Insurance (depending on the nature of work)
Alongside this, ensure they have the right licences, qualifications and training to carry out the role safely and competently. This may include:
- Driving or plant operation licences
- NVQs, City & Guilds, or degree-level qualifications
- Professional diplomas or memberships (e.g. IOSH, CITB, CIM)
- Evidence of prior work or testimonials
Health, Safety and Environmental Responsibilities
When engaging contractors, health and safety obligations usually remain with the business. This includes providing PPE and ensuring health monitoring is in place. Contractors must still be managed under the same health, safety, and environmental standards as employees.
Why Compliance Matters
Engaging self-employed contractors is an excellent way to fill temporary skills or resource gaps. However, compliance cannot be overlooked. Proper checks at the outset protect both the business and the contractor, ensuring a safe and lawful working arrangement.
Need support with compliance checks for contractors?
At THSP, we help businesses stay on top of HR, Health & Safety, and Employment Law responsibilities. To discuss your contractor management processes, call us today on 03456 122 144.