Visiting music teachers: changing employment status

Schools typically engage visiting music teachers (“VMTs”) either as employees or self-employed contractors. For those independent schools that employ VMTs, there is growing concern that higher fees, as a result of the addition of VAT from January 2025, may lead to a fall in demand for private music tuition.

In an attempt to mitigate against this risk, a number of independent schools have been exploring whether they can instead engage their existing employed VMTs as self-employed contractors, and if so, how this can be achieved.

Schools exploring this option need to exercise caution before implementing any changes, and this note provides guidance on the potential legal implications associated with such a change in status. There may also be tax implications and schools should take legal and tax advice before proceeding.

Employment status

Employment status in the UK is complex. Currently, for employment law purposes, individuals are either an employee, worker or self-employed contractor – with employees benefitting from the most employment rights and protections, and self-employed contractors having the least.

While there are a range of factors that will be relevant in determining employment status, the key ones are control, personal service and mutuality of obligation. Generally speaking, an ‘employee’ will be subject to a higher level of control over how and when they carry out their work, they will be required to personally undertake the work, and there will be an obligation both on the individual to work and on the school to provide work. In contrast, a genuinely self-employed individual will generally have autonomy over the method and timing of their work, will be in a position to provide a substitute to undertake the work at any time and without unnecessary limitation, and will be free to reject work.

Worker status is something of a hybrid category. In order for someone to be a worker, the key requirement is personal service. This means an individual has to provide the work personally, or only has a very limited right to provide a substitute, and depending on the circumstances an individual may be a worker where they meet this but not certain other key elements of employee status.

There are advantages and disadvantages to each of the three categories. Where a school employs its VMTs it will retain control over how and when they carry out their work, the fee charged to parents for their services and can legitimately require the employee to undertake the work personally. This level of control, however, comes with greater potential liability and, typically, cost. The opposite is true where VMTs are engaged as self-employed contractors; a school loses a degree of control and cannot demand personal service or dictate the VMTs fee but takes on less potential liability and cost.

Employment law risks

The process of changing the employment status of a VMT, or any member of staff, is not straightforward and attracts a number of potential legal and practical risks, as follows.

Terminating existing contracts: to change a VMT’s status from employee to self-employed contractor, the existing contractual arrangements must first be brought to an end, which means existing contracts of employment must be terminated. The termination of the employment contract, even if agreed with the VMT, will constitute a dismissal in law and a school would need to be able to demonstrate a potentially fair reason for the termination, and follow a fair process.

It would be necessary to consult with affected VMTs about the proposed change in status, with a view to securing their agreement, if possible. The type of consultation required will depend on the specific circumstances, in particular whether the VMTs have accrued unfair dismissal protection, and the number of staff affected.

A consultation process of this nature may prove contentious, and schools will need to think carefully about how they will act if affected VMTs are unwilling to agree to the change – i.e., would they, ultimately, enforce the change either unilaterally or by way of dismissal and re-engagement.

In terms of risk, as with the termination of any contract of employment, schools will need to be mindful of the possibility of legal claims. Where VMTs have been engaged as employees for more than two years, they will have unfair dismissal protection. Arguably, depending on the business case for changing employment status, there may also be an entitlement to a redundancy payment on the termination of the employment contract. There is also the potential risk to staff morale and the reputation of the school.

Control: When engaging a VMT as an employee or worker, schools are able to control who will be providing the service to its pupils. By contrast, self-employed contractors will typically have a right of substitution, meaning if a VMT engaged by a school is unavailable to carry out scheduled lessons, they can organise for someone else to take their place, subject to limited qualifications, such as appropriate safeguarding and regulatory obligations being satisfied.

Schools also enjoy greater control over employees and workers in respect of how services to pupils are delivered. Employees will be subject to the full range of staff policies and procedures, meaning schools can set standards and expectations which their VMTs will be obliged to follow. If engaging VMTs as self-employed contractors, schools will need to relinquish this level of control, and how VMTs provide their services to pupils will, to a degree, be up to the individual. Although schools would usually stipulate certain expectations, either formally within a contract or informally, if these are excessive, they may risk claims relating to employment status and undermine arguments that the VMTs are genuinely engaged as self-employed contractors.

Distinguishing between categories of employment status

Even if an employed VMT agrees with a proposal to operate on a self-employed basis, arguments as to employment status may arise if the working relationship deteriorates or in the event of a dispute. As noted above, a court or tribunal will consider a range of factors in determining employment status. Whilst the terms of any written contract between a school and a VMT and the label given to an individual will be relevant, an employment tribunal will look at the practical arrangements as part of its decision-making process.

Schools should be able to point to specific differences in the way employees, workers and self-employed contractors are treated. Where a VMT is currently engaged as an employee and an agreement is reached for them to be re-engaged as a self-employed contractor, if the working arrangements remain essentially the same, a court or tribunal is likely to consider the VMT to be an employee in law and, as such, entitled to the full range of employment law protections and rights.

With this in mind, any change from employee to self-employed status should also result in a change in the existing working arrangements so that a school’s self-employed contractors are clearly distinguished from the school’s employees and workers. Categorising an individual as self-employed in error can result in costly claims for backdated holiday pay, pension contributions and tax liabilities, for example.

New starters

Given these risks, schools that currently engage their VMTs as employees may consider the possibility of maintaining this arrangement, whilst engaging new VMTs as self-employed contractors. This will, however, bring its own challenges, not least ensuring existing employed VMTs are treated differently from those engaged as self-employed contractors, so as to justify the different employment status categorisation.

In addition, given the impact of VAT, this may result in a situation in which a school’s employed VMTs are more expensive to parents compared to those engaged on a self-employed basis. Parents may be more inclined to use the services of the cheaper self-employed VMTs, leading to a reduced demand for the services of those employed.

This could, inadvertently, result in a redundancy situation that is likely to be contentious given it will have arisen as a result of a school’s decision to engage new VMTs as self-employed contractors, undercutting existing employed VMTs.

To avoid this situation, a school may be inclined to require a self-employed VMT to increase their fee to correspond with the VAT inflated cost of its employed VMTs. As noted above, however, this may undermine their categorisation as self-employed and could lead to future employment status challenges.

Summary

In short, this is not straightforward and any proposal to change the employment status of a school’s existing VMTs, or to engage new VMTs on a different basis compared to existing VMTs, will carry risk. There are potentially significant legal implications. There may also be tax implications, particularly where the change in status is driven primarily by the imposition of VAT. We recommend schools seek professional legal and tax advice before proceeding.