ESM2035 - Overarching Contracts of Employment

Legal position

In order for an overarching contract to be a contract of employment there must be mutuality of obligations during the gaps between assignments; and the mutual obligations during the gaps must be obligations which relate to the provision of payment for work personally performed by the worker. Provided that exists and the engager exercises a sufficient degree of control over the worker and further that other terms and conditions are consistent with the contract being an employment contract, it will be an overarching employment contract.

The approach for determining whether a contract is an overarching contract of employment is:

  1. Look to see if there is mutuality of obligation (see general guidance at ESM0543) existing in the gaps between assignments;
  2. If there is no mutuality of obligation in the gaps between assignments then there cannot be an overarching contract of employment. For the contract to be an overarching contract of employment, rather than a series of separate employment contracts, the obligations must be continuous. In other words, if the obligations cease in the gaps between each separate assignment then there is not an overarching contract of employment.
  3. If there is mutuality of obligation in the gaps between assignments, which relate to the provision of payment for work personally provided by the worker, then that would be sufficient to place the contract in the employment field.
  4. If the contract is in the employment field and the conditions as laid down in the case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, are satisfied (see ESM7030) then the contract will be a contract of employment and an overarching contract of employment too.
  5. HMRC believe that the correct legal position is set out in the case Clark v Oxfordshire Health Authority [1998] IRLR 125 (see ESM7190). At paragraph 41 Sir Christopher Slade said:
“I would, for my part, accept that the mutual obligations required to found a global contract of employment need not necessarily and in every case consist of obligations to provide and perform work. To take one obvious example, an obligation by the one party to accept and do work if offered and an obligation on the other party to pay a retainer during such periods as work was not offered would in my opinion, be likely to suffice. In my judgment, however, as I have already indicated, the authorities require us to hold that mutuality of obligation is required to found a global contract of employment. In the present case I can find no such mutuality subsisting during the periods when the applicant was not occupied in a ‘single engagement’. Any obligation of confidentiality binding her during such periods would have stemmed merely from previous single engagements. Apart from this, no continuing obligation whatever would have fallen on the authority during such periods.”