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Employment status - Ryanair's latest headache

View profile for Lucy Sorell

Ryanair faces continued media interest in the context of an investigation by HMRC into the employment structures it imposes on its UK-based pilots. 

Ryanair requires its UK-based pilots to set up their own Irish limited companies of which they become directors. The limited companies then supply the pilots to agencies which then in turn supply them to Ryanair. However, this structure has attracted attention from HMRC as the pilots are often unaware of their tax obligations as directors of limited companies – and because there is a question mark over their employment status for tax purposes.

The aim of Ryanair’s arrangements seems to be to avoid a direct worker or employment relationship between Ryanair and the pilots. The fact that the pilots are “supplied” by limited companies of which they are directors gives the appearance of them being contractors in charge of their own businesses and introduced to Ryanair by the agencies, and Ryanair being their client. If this were genuinely the case, the pilots would not be employees or workers of Ryanair and Ryanair would not be obliged to pay them statutory entitlements such as paid annual leave and sick pay. 

As can be seen from the recent cases involving Uber, Citysprint and Pimlico Plumbers, Employment Tribunals (as well as HMRC) will look behind arrangements whereby companies purport to contract with self-employed contractors and will carefully scrutinise, among other things, the individuals’ right of substitution (both in their contracts and in practice), the degree of control the “client” has over the individuals and how they work, how many different “clients” the individuals work for and whether the individuals supply their own equipment.  The right of substitution in particular is key – and it does not seem likely that, in practice, Ryanair’s pilots would have this, given that they are in a highly-skilled profession and that Ryanair would probably be reluctant to accept alternative pilots onto its rotas unless they had been vetted and/or received bespoke training.

Given the background of pilots’ separate disputes with Ryanair over their terms, it is not impossible that employment status will be thrown into the mix. 

You can read more about the HMRC interest in Ryanair’s employment structures here.