What contract to use when taking on staff

Are you considering taking on staff, but unsure about the basis on which to engage them? Should you opt for a free-lancer, or offer an employment contract? This article addresses the most common questions about employment status, with particular focus on the risks and benefits of self-employment.

First published in Independent Practitioner Today February 2020


Engaging staff as employees gives your practice the most control over how they operate. It also affords staff the most rights, for example rights relating to unfair dismissal and statutory redundancy. An employer is obliged to provide work and an employee is obliged to accept it.

Employers are sometimes seduced by the idea of using fix-term employment contracts as a mechanism for reducing employment risks. However, they should be used with caution, because a fixed term does not necessarily mean the employee can easily be dismissed at the end of it. They still have all the usual employment rights, including in relation to redundancy.


A worker is someone who works under a contract to do work or services personally for a reward. A worker has fewer rights than an employee, but they are still entitled to some employment protection, for example:

  • Statutory maternity pay
  • National minimum wage
  • Paid holiday
  • Rest periods and other limits on working time
  • Not to suffer detriment under whistleblowing legislation

The term “casual worker” includes several different types of working arrangement, but commonly includes bank staff, seasonal workers and individuals working on zero-hours contracts.


Someone who is genuinely self-employed falls outside the definition of “employee” and “worker”. In practice, it can be difficult to determine employment status, but set out below are the key factors that are taken into account.

Self-employed contractors have the freedom to accept or reject work, and to substitute another person to do their work. Self-employed contractors generally provide their own uniform and equipment and can choose when and how they perform the services.

Rather than being paid a fixed salary, they are typically required to raise invoices. Compared to workers and employees, the self-employed are usually expected to take a degree of financial risk in the practice, for example, by investing their own capital and incurring personal liability for losses arising from their work. They are also more likely to have an opportunity to profit from its success – for example they might be paid based on what they bring in to the practice.

Generally, the more control your practice seeks to exert over staff, the more likely they are to be deemed by HMRC or an employment tribunal to be workers or employees, regardless of what their contract says.

Doctors who are independent contractors typically arrange their own professional indemnity insurance, but market conditions in the sector mean that providing it for them can be useful as an incentive for them to join.

Doctors are often attracted to the perceived tax benefits of self-employed status, but the tax position is complicated: an individual can, for example, be self-employed for tax purposes but be a worker for employment status purposes. Individuals who contract through an intermediary such as a service company may be subject to IR35 which can impose a deemed PAYE charge.

There has been a rise in the prevalence of self-employment status in the labour market over the last few years, sometimes referred to as the “gig economy”. Several legal challenges have resulted, for example cases involving Uber and Deliveroo. In considering these cases, the courts look behind the wording of a contract and consider the relationship between the parties in practice.

Ultimately your choice of which model to adopt will depend on factors such as

  • How well the parties know/trust each other
  • The appetite for risk of each party
  • Cashflow
  • The nature of the work, including the desired degree of autonomy
  • The importance of consistency across the practice
  • Labour market conditions

For a growing practice, flexibility is likely to be key. You may need to review and adapt your model as your business grows. You might start out using independent contractors, and later offer employment contracts as cash-flow improves and consistency in your workforce becomes more important.