Is your consultant actually employed?
Employee versus contractor/consultant
An employee is a person employed by an employer and working under an employment contract. This relationship means that the employer has a high degree of control over the employee's tasks, working hours and workplace. The employee is dependent on the employer and is protected by employment law.
A contractor is a person who performs work on behalf of a company without having a permanent employment contract. To simplify, it can be roughly said that all the company's suppliers are contractors. Contractors are usually more independent and are responsible for their own activities, including paying taxes and social security contributions. They are not covered by any labor law protection.
The risks
A major employment law risk is if a consultant who invoices you is in fact considered by a court to be an employee. Above all, the tax law effects could be significant. In Swedish labor and tax law, it is important to be able to distinguish between employees and contractors, as this affects the rights and obligations of the parties. If a contractor is in fact an employee, there is a risk that the employer will owe taxes and fees for the employment and that the employee will then usually be considered to be permanently employed.
Factors that a court looks at
To begin with, a court looks at all the factors in a legal relationship. There is case law in this area, but different factors may have different importance in different situations. Therefore, it is good to remember that the more it looks like a chicken, the more likely it is that the court will conclude that it is actually a chicken. It is therefore at the borderline that it becomes interesting to look at these factors.
The agreement
An employment contract suggests that the person is an employee, while an assignment contract points to a contractor. However, it is the actual application of the contract in practice that is crucial, not just the name of the contract.
Control and management
The court assesses the extent to which the employer controls the work. If the employer controls the details of the work, this indicates that the person is an employee. If, on the other hand, the person has a great deal of freedom to decide how the work is to be carried out, this indicates that the person is a contractor. Furthermore, it is common for a worker to receive materials and tools from his employer and vice versa.
Liability and risk
Contractors often bear more financial responsibility than workers. Contractors take on the financial risk of profit or loss themselves. Furthermore, it is common for a worker to receive materials and tools from their employer and vice versa. Workers are usually financially dependent on the employer, who covers these costs.
As a general rule, the contractor can transfer the work to someone else without affecting the contract, indicating that it is a contract for services and not an employment contract. Of course, there may be exceptions to this rule depending on what is to be delivered in the contract.
Integration of work into activities
If the work is part of the core business and is performed continuously, this indicates that the person is an employee. If, on the other hand, the work is a specific service performed outside the regular activities, this may indicate that the person is a contractor. A long-term and continuous working relationship often indicates employment, while occasional or sporadic assignments point to a contractual relationship.
Multiple clients?
A person who works for several employers at the same time, or has the possibility to do so, is likely to be a contractor. An employee is usually attached to a single employer.
Good luck, and don't forget to get in touch if you have any questions.
Kind regards,
Christoffer Lewinowitz
Employer lawyer
With us, the first call is free!
We believe it should be easy as an employer and manager to do the right thing. The distance to ask for help must be short, which is why an initial consultation is always free with us. We will hear from you within 24 hours.
Security agreement for employers...
The subscription includes:
A good complement to the company's legal expenses insurance. Labor disputes are usually an exception in business insurance. For terms and conditions, application and price list, click here.