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Mutuality of Obligation
Mutuality of Obligation means that the employer and employee have a mutual obligation to one another.For example, if an employer recruited a member of staff on a permanent basis they would have an ongoing responsibility to provide work to the staff member each week. The staff member would have a responsibility to accept the work being offered as they have agreed to become a permanent member of staff. The terms of this agreement are defined in the employment contract between the employer and employee.
Contractors and Mutuality of Obligation
Contractors do not normally have mutuality of obligation as contracts are agreed for a fixed period of time and once complete the contractor does not have an obligation to accept any other work offered by the client. However, consideration should be given to situations where multiple contracts are undertaken at the same time.If contract terms and conditions do not allow a contractor to undertake a secondary assignment during a project this may be an indicator towards employment. If contract terms and conditions allow work to be undertaken elsewhere at the same time then this may be seen as an indicator towards self employment.
One of the reasons contractors are so highly paid is so that the client has the ability to dispense with services as and when required.
