24th October 2011

Foot Anstey: When FSA obligations met the employment tribunal

A judgment this week has sent a warning light to firms retaining advisers on a self-employed basis. An Employment Tribunal found that the level of control exercised by a firm over a "self-employed" IFA, largely due to FSA compliance requirements, meant there was a sufficient degree of control to establish an employment relationship.

Most firms operate using self-employed IFAs rather than employees to conduct their business. One of the benefits of using self-employed workers is that they do not have the same level of employment protection as their employee counterparts. There are also tax benefits for the adviser.

The arrangement works well for both parties, often until things go sour. Sometimes the self-employed IFA has an apparent change of heart and seeks to argue they are in fact an employee, with the commensurate protections that affords, such as the right not to be unfairly dismissed. Whether a worker is an employee or truly self-employed is a question for an Employment Tribunal to determine. One of the factors a Tribunal looks at is the degree of ‘control’ the firm has over the IFA: the greater the level of control over how the IFA conducts business, the more likely the relationship is to be an employment one, as was found in this case.

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FSA/FCA