Remote working: 22 FAQs

  1. We are planning to recruit our first travelling sales person. What legal points should we consider?
  2. What are the relative merits, in legal terms, of employing a travelling sales person on salary plus bonuses, as against self-employed on commission?
  3. We are taking on a sales director for Europe, based in Munich. Should their contract be governed by UK law, German law, or does it make no difference? 
  4. We have taken on someone to represent us abroad, who will be away for up to six weeks at a time. Are there any formalities to observe? 
  5. We use a self-employed sales 'consultant', whom we hardly ever see. Now HMRC is saying they are employed. How can we refute this?
  6. A non-executive director does occasional consultancy work for us. HMRC claims they are employed. How do we prove otherwise?
  7. We employ a sales director in North America. Should we be paying tax and NI for them here, or there?
  8. We are making an employee normally based in Paris redundant. Do we have to make a redundancy payment?
  9. We have to make two sales people redundant. They arrange their own working hours. How do we calculate their redundancy pay?
  10. A travelling sales person has landed us with a ruinous contract. They were acting within their powers. What should we do?
  11. We suspect one of our sales people may be using visits to our clients to sell goods on their own behalf. What should we do?
  12. An employee travelling in a company car was involved in a bad smash. At the time they were on private business. Is our insurance company liable?
  13. We want to replace our current company cars with something more tax efficient, but the sales force is objecting. Can we just do it?
  14. One of our sales people has been clocking up improbable mileage, they say on company business. We don't believe them. What should we do?
  15. A travelling employee has run up a huge room bill - we suspect for porn. Can we deduct the excess from their next pay cheque?
  16. Can we set subsistence payments off against tax? Is there a limit?
  17. Are there health and safety limits on how far our sales people can drive in a day, or over how long a period?
  18. Do the normal 20 minute breaks after six hours apply to people travelling on company business?
  19. Are we responsible for safeguarding the client information on our sales person's laptop? And if so, how?
  20. Is it reasonable to make the use of a hand-held mobile phone while driving a sackable offence?
  21. An employee has been accused of attempting bribery abroad, and now we are banned from the country in which they were operating. What can we do?
  22. A sales person seems to be unable to recover from a back injury, and cannot travel. Can we dismiss them?
  23.  

1. We are planning to recruit our first travelling sales person. What legal points should we consider?

Your sales people can make or break your business, and they can be particularly volatile, so it is worth putting some thought into this.

  • You need to establish what your sales person's duties will be. In particular, are you expecting them to concentrate on maximising sales, or do you want them to spend time and effort on developing your market? Who do they report to? And when?
  • What powers are you going to give them? To what extent can they negotiate over price? How big are the deals they can commit you to? What sort of expenses are you willing for them to incur?
  • Do you want to use them on an employed or self-employed basis (see 2)?
  • If you are going to use them on a self-employed basis, what sort of restrictions (if any) are you going to place on their right to sell competing products or do business for rival firms?
  • Do you want to pay them on salary (or retainer), or on commission, or a mixture of the two?
  • What sort of benefits are you willing to provide - for example, by way of a company car?
  • Where do you expect them to be based?
  • Do you require them to report/account for their whereabouts on a daily/weekly basis?
  • Are you going to start off with a trial period, and if so, for how long?
  • What restrictions (if any) will you attempt to place on them when they leave? If you want to introduce restraint of trade clauses, you must note them in writing, under the Commercial Agents Regulations. Are they limited in area, time etc, as required under these regulations?

You need a reasonably clear statement of expectations in case things go wrong, particularly as sales people tend to get the kind of money that makes breach of contract a much more likely recourse than a claim for unfair dismissal. On the other hand, the more precisely you specify these matters, the more you tie your own hands. This really is an area in which you should take legal advice.

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2. What are the relative merits, in legal terms, of employing a travelling sales person on salary plus bonuses, as against self-employed on commission?

There are arguments for and against, in both cases.

If you employ someone, on a salary-plus-bonus basis:

  • you can make it a condition of their employment, that they do not work for anyone else
  • you will have much more control over his time
  • you should have much better control over how they deploy their time - for instance, the extent to which they spend time on keeping existing customers happy, as opposed to chasing new ones (or vice versa)
  • depending on how much you are prepared to pay in salary, the overall package is likely to be much cheaper

On the other hand:

  • you are committed to paying a salary, whether or not there are results to justify it
  • you will have to spend time and money on managing your sales person, which both of you may find irksome
  • you may end up with vicarious liability for some of their actions. For example if they cause an accident whilst visiting a customer's premises for you, you will generally be responsible for any injury, damage or loss arising from the accident
  • the employee will be entitled to more extensive employment rights, including protection against unfair dismissal

If you use someone on a self-employed basis:

  • you will not have to pay anything (possibly not even selling expenses, depending on the contract), until sales have been made
  • what you pay will be directly related to sales made
  • the individual will have limited rights compared to that of an employee

On the other hand:

  • whatever volume of sales is made, it is likely to cost you far more than the same volume sold through an employee, even after allowing for the hidden costs of employment (holiday pay, sickness pay etc)
  • a self-employed sales person is unlikely to be working for you alone, so to some extent you will have to take your turn in using their expertise
  • it will be more difficult to control what they are doing and how they are doing it
  • they will be entitled to a regular statement of the commission due, under the Commercial Agents Regulations, and access to all the information he needs to check that statement
  • you may have to consider other implications of the Commercial Agents Regulations

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3. We are taking on a sales director for Europe, based in Munich. Should their contract be governed by UK law, German law, or does it make no difference?

Normal practice is to offer the worker the choice of jurisdiction. It may be the system of law with which the parties are most familiar. If no choice of jurisdiction is specified in the contract, then the contract is governed by the law of the country in which the work is generally carried out - in this case, probably Germany. Under the same convention, if one of the two states has better minimum terms and conditions - for example, on maximum working hours, annual holidays, health and safety at work, or discrimination - the fact that the employee has agreed to have his contract governed by the law of the other state does not deprive him of these benefits.

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4. We have taken on someone to represent us abroad, who will be away for up to six weeks at a time. Are there any formalities to observe?

Yes. If any of your employees are asked to work abroad for more than a month at a time, you must include in their statement of terms and conditions:

  • the period for which they are to work outside the UK
  • the currency in which they are to be paid while they are outside the UK
  • any additional remuneration or benefits to which they are entitled because they are required to work outside the UK (for example, living accommodation)
  • any terms and conditions relating to their return to the UK

It may also be appropriate to review the terms of their employment contract, and take into consideration the laws of the country in which the employee will work. Take legal advice.

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5. We use a self-employed sales 'consultant', whom we hardly ever see. Now HMRC is saying they are employed. How can we refute this?

HMRC may be coming down on you because the 'consultant' has not paid their tax bills, in which case you might have some difficulty in getting them to co-operate. Essentially you need to establish some or all of the following points: that:

  • you have no say in how they run their business
  • you put no money into it
  • they are responsible for the losses, as well as the profits
  • you have no control over when they work for you, or where
  • you provide them with none of the equipment they need to do their job
  • they receive no regular payments; the bulk of the money that you pay them relates to their results
  • they can substitute others to do their work
  • they work for other businesses as well

This kind of situation - in which you could get landed with paying for their tax and National Insurance bills - underlines the importance of having a clear contract with self-employed sales people (see 6).

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6. A non-executive director does occasional consultancy work for us. HMRC claims they are employed. How do we prove otherwise?

A director (executive or non-executive) will always be taxed under the Schedule E (employment) regime, by virtue of holding an office.

A consultant who is not a director (of any kind) will need a strong contract for services (self-employed), as opposed to a contract of service (employed). This should be written by an employment lawyer.

A contract for services should include agreement on all or most of the following:

  • the consultant can substitute personnel (if possible)
  • they will remedy defective work
  • they may work for other organisations
  • there will be minimal supervision or control
  • they will provide equipment
  • there will be flexibility on the time and place of work
  • they have the right to decline work
  • they will issue invoices
  • they will provide insurance

It should also contain a statement that the contract is a contract for services.

This is not an exhaustive list, but merely identifies some of the factors necessary to prove self-employment.

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7. We employ a sales director in North America. Should we be paying tax and NI for them here, or there?

If your employee remains resident in the UK, you as a UK employer will still be liable to deduct tax and National Insurance contributions (NICs), even though all or most of the duties are performed abroad.

If the employee becomes non-resident, you are no longer required to deduct tax and NICs. However, you will have to take advice as to whether local tax is payable.

If any income is taxed in both countries, then double taxation relief will apply, with any foreign tax paid being set off against the individual's UK tax liability.

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8. We are making an employee normally based in Paris redundant. Do we have to make a redundancy payment?

Under UK law you do not have to make redundancy payments for any employee normally based abroad. You may, however, still be bound to make such a payment under the terms of the employee's contract, or under local law. Take legal advice.

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9. We have to make two sales people redundant. They arrange their own working hours. How do we calculate their redundancy pay?

You need to calculate their average weekly remuneration over a 12-week period ending with:

  • the calculation date (if that is the last day of a week)
  • the last complete week before the calculation date

You then follow the normal formula relating to age and length of service (unless their contract of employment specifies otherwise). Contrary to earlier expectations, age remains a factor, despite legislation banning age discrimination.

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10. A travelling sales person has landed us with a ruinous contract. They were acting within their powers. What should we do?

Seek early legal advice. Depending on the circumstances, your best bet may be to repudiate the contract as soon as possible, in the hope of limiting any losses made by the other party in relying on it. But take advice, both on resolving this situation, and on ensuring you do not get caught with this kind of vicarious liability in future.

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11. We suspect one of our sales people may be using visits to our clients to sell goods on their own behalf. What should we do?

An employee working remotely is bound by the express and implied terms in her employment contract just as thoroughly as one working under direct management scrutiny. The implied terms, though not spelt out, form part of every employment contract, and include the obligation on the employee to serve the employer honestly and faithfully, and not to enter into competition with the employer's business. So you need to investigate more thoroughly, and if there is evidence to suggest that your suspicions are correct, consider activating your disciplinary procedure.

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12. An employee travelling in a company car was involved in a bad smash. At the time they were on private business. Is our insurance company liable?

That depends on the terms of the insurance policy. Where private use of a company car is permitted, the insurance policy will normally cover accidents on private as well as company business. If, however, the employee was not authorised to use the car privately, any insurance cover may be invalidated. In that case you not only have to worry about the cost of repairing or replacing the car; you may also have to worry about being sued by third parties, for neglecting to ensure that your employee observed your rules. Check your policy details, and if necessary, take legal advice.

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13. We want to replace our current company cars with something more tax efficient, but the sales force is objecting. Can we just do it?

To begin with, check the terms of the relevant employees' contracts of employment. If the contracts are silent on this - if they say nothing about it - then in theory at least your sales force might be able to argue that you are breaching terms established by custom, even if never spelt out. If in doubt, consult a lawyer about the situation, with a view to ensuring that your terms and conditions make it quite plain in future that the choice of company car is yours.

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14. One of our sales people has been clocking up improbable mileage, they say on company business. We don't believe them. What should we do?

Ask them to account for it. If they can’t do it, then consider commencing action under your disciplinary procedure and if there is still no satisfactory explanation, issue a written warning. It is unreasonable to expect your sales people always to travel from one appointment to another by the most direct route, but if there is a variation in the mileage of more than, say, 25 per cent, they should expect to be asked to account for it.

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15. A travelling employee has run up a huge room bill - we suspect for porn. Can we deduct the excess from their next pay cheque?

Unless there is a specific clause in the contract, entitling you to make deductions from the employee's salary for personal expenditure incurred, the answer is no. Ask the employee in question to account for the bill, and if necessary, to come up with suggestions as to how they intend to reimburse the excess. If there is no satisfactory explanation, and no proposal for reimbursement, you may want to consider disciplinary action. Either way, you should probably establish guidelines on subsistence expenditure, to curb the risk of a similar situation developing in future.

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16. Can we set subsistence payments off against tax? Is there a limit?

Any payments 'wholly and necessarily' incurred for the business can be set off against the corporate tax bill, and this includes subsistence payments - both accommodation, and the cost of meals while away from home. There is no limit, though HM Revenue and Customs might start asking questions if the hotel bills were quite obviously disproportionate to the success of the business and the standing of the individual running them up.

Where a business makes subsistence payments to an employee - whether by way of a refund, a scale charge or a round sum payment - the amount must be entered on the employee's P11D, and then set off by the employee against income in order to claim tax relief. However, provided that HMRC is satisfied that the business is paying the employee no more than the expenses incurred, and there are reasonable systems for monitoring and auditing them, it may be possible to obtain a 'dispensation' from your local tax office, so that you do not have to declare such payments.

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17. Are there health and safety limits on how far our sales people can drive in a day, or over how long a period?

There are no restrictions on car drivers' hours, as there are on the hours of lorry and bus drivers (where maximum working hours in a week are now limited to 60, and average hours to 48, over a four month period). However, employers have a duty to ensure the safety and welfare of their employees, and also a responsibility to ensure that others are not put at risk by their work activities - one third of road accidents in the UK recently are believed to have involved people working.

So employers are under a duty to ensure, for instance, that work vehicles are properly maintained, and that their drivers are not put under unacceptable pressure by unrealistic schedules. They are potentially vulnerable if, for instance, they contact their drivers by mobile phone (with the drivers themselves now vulnerable to an increased fine of £60, plus three penalty points, if they respond on a hand-held model; the same penalties apply if they use a hands-free version but fail to maintain 'proper control' of the vehicle). Drivers harassed to the point of careless or inconsiderate driving are now subject to fines of up to £5,000, and imprisonment of up to five years if they cause death by such driving.

The Department for Transport now suggests that the management of any organisation in which there are five or more employees driving on business should develop a policy on driving for work, as part of a move to integrate the management of this activity into the management of health and safety more generally. Such a policy would incorporate requirements for:

  • risk assessment
  • control measures to minimise risks, as for instance:
  1. eliminating journeys where possible, by teleconferencing, rescheduling deliveries etc
  2. ensuring that vehicles are appropriate, and effectively maintained
  3. ensuring that drivers are appropriate, ie fit to drive, legal (the Department suggests checking licences every six months), adequately trained (including training in first aid), and aware of the organisation's policies on mixing driving with drugs, alcohol, illness, stress, fatigue, speed, and the use of mobile phones
  4. introducing supporting measures (such as emergency planning, and incentives for safer driving)
  • maintenance of data records, to find out how well the policy is working
  • reviews of such data, to fine-tune the policy if necessary

These may sound like counsels of perfection, but in fact they require little more than is required anyway under the Management of Health and Safety at Work Regulations, which should include assessments of any dangers to employees travelling on business, with appropriate steps being taken to minimise the risks.

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18. Do the normal 20 minute breaks after six hours apply to people travelling on company business?

There is an exemption from these requirements of the Working Time Regulations for people involved in long travelling; however, they have to be given 'compensatory rest' when it is feasible. Since employers are responsible for the safety and welfare of travelling employees and third parties who might be affected by their actions (see 17), it makes sense to insist on regular rest periods for travelling employees, as well as those in the office.

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19. Are we responsible for safeguarding the client information on our sales person's laptop? And if so, how?

Yes, it is your responsibility to ensure that this information does not fall into the wrong hands. You need to impress upon all your staff the importance of not losing their laptops, mobile phones, personal organisers or memory sticks - especially if they contain information on identifiable individuals. They should keep them secure at all times.

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20. Is it reasonable to make the use of a hand-held mobile phone while driving a sackable offence?

Yes. 'Anyone who causes or permits any other person' to use a hand-held mobile while driving is guilty of an offence under the regulations banning the use of hand-held mobile phones. 'Using' a mobile can include activities other than taking and making calls - such as switching off the phone alarm - and even when the car is stationary but in traffic. So you would certainly be liable if you required an employee to use one while driving, and possibly if you failed to forbid employees from using them under those conditions. Your disciplinary rules should demonstrate that you are taking the regulations seriously.

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21. An employee has been accused of attempting bribery abroad, and now we are banned from the country in which they were operating. What can we do?

The use of bribery abroad is an offence under UK law, so you have presumably made it plain to your employees that you discourage it. Your first step should be to set up an investigation. If the investigation suggests that the charge is justified, you ought to refer the matter to the police, regardless of any disciplinary action that you may take against the employee.

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22. A sales person seems to be unable to recover from a back injury, and cannot travel. Can we dismiss them?

Incapacity to do the job – on medical or any other grounds – is a potentially fair reason for dismissal. In theory it is therefore possible to dismiss an employee fairly on this ground, but only if you follow the appropriate procedure.

However, this is not the only consideration. It is possible that the sales person would be regarded as disabled for the purposes of the Equality Act 2010. If so, you would be legally obliged to carry out an assessment as to whether any ‘reasonable adjustments’ could be made, to ensure that he was not placed at a disadvantage. You might also need to be wary of committing ‘indirect discrimination’ if you have a rule or policy that applies to all your other sales people but disadvantages the sales person with the back injury. 

There are other factors to consider, such as the effects of dismissal on any entitlement to receive benefits under a permanent health scheme.

In view of the very substantial compensation that can be awarded to employees unfairly dismissed in such cases, it will pay to obtain legal advice before taking any decision to dismiss.