Paid time off does not automatically make a B2B contractor an employee
Providing for paid time off under a services provision agreement does not, in itself, establish an employment relationship. What matters, however, is how that time off is taken and accounted for: the arrangements should distinguish it from employee annual leave.
The Chief Labour Inspector’s latest interpretation concerns proposed B2B arrangements with construction contract directors. Under the proposed model, service providers would be entitled to 24 days of paid time off. The Chief Labour Inspector concluded that the terms described did not indicate to an employment relationship.
Service providers would be required to give advance notice of their time off without having to obtain the company’s approval. Unused days would neither carry over to the following year nor give rise to a payment in lieu. The authority cautioned that a different assessment would be needed if, in practice, the time off were approved, recorded and accounted for in the same way as employee annual leave.
Importantly, the Chief Labour Inspector’s assessment covers the proposed working arrangements as a whole, not just the provisions on paid time off. In the authority’s view, the key factors supporting treatment as a civil-law services arrangement rather than employment included the absence of employer-like direction and control, the service provider’s freedom to decide where and when to provide the services, the ability to use a substitute, and exposure to business risk.