Deemed employment
is the legal conclusion that a person engaged as a contractor must be treated as an employee — for tax, social security or employment rights — because the working reality is employment. It can arise from audits, court claims or statutory presumptions, and applies regardless of what the contract says.
Where deemed employment comes from
- Tax regimes: the UK’s IR35 taxes deemed employment income; other states recharacterise fees as salary with withholding.
- Social security audits: Germany’s status determinations and Swiss AHV assessments create contribution liability years back.
- Statutory presumptions: post-directive EU rules presume employment for dependent platform and, in some states, other contractors.
- Worker claims: individuals asserting employment rights — notice, holiday pay, dismissal protection — at the end of engagements.
FAQ
What does deemed employment cost the engager?
Typically retroactive employer and often employee social contributions with interest, income-tax withholding shortfalls, and accrued employment rights — several years of exposure in most systems. Add penalties where negligence is found. It is consistently cheaper to restructure early than to lose the argument later.
Can a contract clause prevent deemed employment?
No clause outweighs facts: substitution rights never used, ‘project scope’ that renews monthly, or provider control that exists only on paper are read against the engager. Contracts matter as evidence, but working practices decide.