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In employment law, economic reality test, can you explain what MOO (Mutuality of obligation) means? And how it helps?
The concept of a person being an employee or an independent contractor is fundamental in many ways and the status of such a worker has implications in tax, in law and in accounting
In a situation of employer / employee, both parties may choose to classify the worker as an independent contractor rather than as an employee who would be subject to the rule of PAYE
BUT, it is irrelevant what the two parties choose to designate as the worker’s status. The reality is based on a number of tests and may be very tricky to determine.
Among those tests applied is the Mutuality of Obligations (MOO) test. Put very simply, MOO involves the obligation on the employer to provide work, together with the obligation on the employee to carry out that work
In a practical situation, where an ’employer’ has no obligation to provide further work to the ’employee’ on completion of a project, the worker would likely be classed as an independent contractor
Equally, where further work is offered but the ’employee’ freely decides not to accept that offer of work, again we’re headed towards independent contractor status
But if the ’employer’ finds it necessary to offer work and the ’employee’ finds it necessary to accept that work, then we’re moving away from independent contractor situation into an employer / employee relationship
Thank you tutor.
I surprise even myself sometimes 🙂