Court ruling opens door for self-employed pension claims

Court ruling opens door for self-employed pension claims

The European Court of Justice (ECJ) has ruled that a UK window salesman should receive paid holiday having previously worked for 13 years on a self-employed basis.

What is being described as a landmark case could open the door to other similar claims from self-employed and so-called 'gig economy' workers demanding backdated pension compensation, Jon Greer, head of retirement policy at Old Mutual Wealth, said.

In a ruling published yesterday (29 November), the ECJ found in favour of Conley King, who worked for The Sash Window Workshop on the basis of a ‘self-employed commission-only contract’ from 1 June 1999 until he retired, on 6 October 2012.

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Under that contract, Mr King was paid on a commission-only basis. When he took annual leave, it was unpaid.

Upon termination of his employment relationship, Mr King sought to recover payment for his annual leave — taken and not paid as well as not taken — for the entire period of his engagement.

The company rejected Mr King’s claim on the grounds that he had the status of self-employed worker.

According to Mr Greer, this court decision “potentially leaves companies facing hefty bills”.

He said: “Whilst the European Court judgement related to the ability for an individual to backdate a claim for unpaid holiday pay, it highlights the risk to companies who incorrectly categorise individuals as self-employed when they are workers.

“If the UK Court of Appeal upholds the judgement, then the door would be open for those wrongly classed as self-employed to demand benefits to which they are rightfully entitled.

“Companies that operate in the gig economy may well feel an immense financial strain as a consequence. Whilst the case in question relates to holiday pay, there is a clear read-across to other worker benefits like pension contributions.”

The current auto-enrolment rules – a 2 per cent contribution divided equally between employer and employee for people that earn more that £10,000 a year – mean that someone on a year salary of £30,000, for example, will pay-in approximately £480 a year, with half coming from their employer.

Mr Greer said: “If it was found that a worker was incorrectly categorised as self-employed, then backdated contributions across several years could add up to steep bill for the employer.”

The government is currently conducting an auto-enrolment review, launched last year by the Department for Work & Pensions (DWP), which is expected to publish a report in December.

One of the possibilities on the table is how to include the self-employed workers in auto-enrolment.

According to data from the Association of Consulting Actuaries (ACA), over 12m UK workers are not eligible for auto-enrolment into a workplace pension.