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Contracts curtailed as fears over Muscat judgment bite

Published on Jun 27, 2006 |

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The Court of Appeal's judgment in the case of Cable & Wireless v Muscat is starting to have an impact in the City, where banks, financial institutions and corporations engage freelance contractors for specific projects.

The Professional Contractors Group is concerned that a combination of uncertainty and misinformation will result in the UK missing out on one of its greatest competitive advantages.

The PCG's policy officer John Kell commented;

"We are suddenly hearing reports about contracts being terminated early, simply because client HR and procurement departments are afraid of being deluged with claims for employment rights. Mr Muscat's case was not typical, and yet it could have far-reaching consequences for long-term contractors and the economy.

"Part of the problem is the absurd situation where employment status and tax status operate independently of one another: a contractor can be taxed as an employee, even when they do not have, and do not want, full employment rights. We believe that genuine freelance contractors should be able to enter into bona fide business-to-business contracts with their clients, either directly or through an agency, without any of the parties fearing that the relationship might be viewed as one of employment.

"Companies that engage contractors on proper business-to-business terms will almost certainly have nothing to worry about - but the situation is not totally clear. We want the Government to acknowledge and address this problem. Continued uncertainty will be detrimental to an economy that thrives on the flexibility and skills offered by the UK's freelance workforce."