Mutuality of obligation and employment status

Q: How does this apply to typical contracts?

Illustration only. Rolling contracts. A project manager has a series of three month contracts with a bank, paid a day rate, with two weeks' notice and no duty on the bank to renew. During each contract the bank must pay for days worked and the manager must work them, so stage one is met for each contract. Arguing a lack of mutuality because the bank need not renew will not work after PGMOL and Northern Lights. The case turns on control and the third stage factors. Occasional bookings. A photographer accepts ad hoc shoots from an agency list and can turn any down or withdraw without penalty. Each shoot still meets stage one, but the light commitment on both sides is a factor that can point away from employment in the overall evaluation, as in the remitted PGMOL decision.

Mutuality of obligation is the basic exchange at the heart of any contract to work: the engager must pay, and the worker must do the work personally. The Supreme Court in PGMOL confirmed that this wage work bargain is met by almost any paid engagement, even a single one, so it rarely decides an IR35 case on its own. How much each side is committed to can still be weighed in the overall picture.

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What does mutuality of obligation actually mean?

HMRC’s Employment Status Manual at ESM0543 says mutuality of obligation determines whether there is a contract in existence at all, and that without it there can be no contract of any kind. The basic requirements are that the engager must be obliged to pay a wage or other remuneration, and the worker must be obliged to provide their own work or skill.

Those requirements are present in employment and in self employment, so on their own they do not decide which kind of contract exists. The phrase used in Nethermere (St Neots) Ltd v Gardiner (ESM7110) is the “irreducible minimum of obligation on each side”. Mutuality is therefore a gateway, not a verdict. The other parts of the test are explained in our guide to employment status tests.

Where does it fit in the Ready Mixed Concrete test?

Ready Mixed Concrete sets three conditions: work and skill in return for pay, a sufficient right of control, and other terms consistent with employment. HMRC’s summary at ESM7335 of the Court of Appeal decision in HMRC v Atholl House Productions Ltd records these points:

mutuality of obligation and a right of control are necessary preconditions, the irreducible minimum for employment;
once they are present, the third stage is a multifactorial evaluation of all the terms;
mutuality and the extent of control can be considered again at that third stage and given appropriate weight;
meeting the first two stages does not create a presumption of employment, because some terms must point away from employment for the answer to be self employment.

So mutuality can appear twice: as a yes or no question at stage one, and as a matter of degree at stage three.

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Why does mutuality so rarely decide an IR35 case?

Under the IR35 and off payroll rules the test is applied to a hypothetical direct contract with the end client, and the stage one question is almost always answered yes while the work is being done. ESM0543 says that where a worker undertakes duties and the engager pays for them there is sufficient mutuality, and the obligations continue until the contract ends. Contractors have often argued that because the client had no duty to offer more work, there was no mutuality. The courts have consistently rejected that argument for the period of the engagement itself:

Usetech Ltd v Young (ESM7270): a minimum of 37.5 hours a week and seven days’ notice in the upper contract meant mutuality was satisfied.
Synaptek Ltd v Young (ESM7260): a four week notice clause made no sense unless the client was obliged to provide work.
Northern Lights Solutions Ltd (ESM7325): the Upper Tribunal held there is no requirement for an ongoing obligation to provide work outside the contract period, and a contract that ends at the end of a project is not inconsistent with mutuality during it.
Kickabout Productions Ltd (ESM7330): the Court of Appeal agreed that it would be contrary to business common sense for Talksport to have no obligation to offer work, and found a solid basis for an obligation to offer 222 programmes a year.

Where mutuality does decide cases is in claims about a continuing umbrella contract between engagements. In Carmichael v National Power plc (ESM7200), station guides working on a casual as required basis had no contract when not working, and the claim failed for absence of mutuality. HMRC notes that the case is no justification for saying casual workers cannot be employees, because each engagement can still be a contract of service. Conversely, Nethermere shows that a regular course of dealing over years can build up enough mutuality for a single continuing contract.

What did the Supreme Court decide in PGMOL?

HMRC v Professional Game Match Officials Ltd [2024] UKSC 29 concerned football referees officiating individual matches in the English Football League. ESM0543 records that the Supreme Court described mutuality at stage one as the wage work bargain, a precondition to employment, and endorsed these Court of Appeal findings:

deciding that an overarching contract is not employment does not decide whether a single engagement is;
the absence of any obligation under an overarching contract to offer or accept work does not prevent a single engagement being a contract of employment;
a single engagement can be employment if work offered is done for payment;
a right for either party to cancel between accepting work and doing it is irrelevant at stage one and does not negate mutuality.

ESM0543 also confirms that the nature and extent of mutuality can be factored into the overall evaluation. The Supreme Court also found a sufficient framework of control, which is covered in our guide to the control test.

What happened when PGMOL went back to the tribunal?

The Supreme Court did not decide that the referees were employees. As ICAEW reports, it upheld the finding that the irreducible minimum of mutuality and a sufficient framework of control were present, and sent the case back to the First tier Tribunal to decide, on all the facts, whether the contracts were employment.

In a judgment released on 1 May 2026, the tribunal found the referees were self employed. ICAEW reports that the tribunal found no obligation on the referees to accept work or on PGMOL to offer it, that referees could decline, reschedule or withdraw from matches without consequence, and that for most the role was a hobby on which they were not financially dependent. It also treated much of PGMOL’s control as flowing from the regulatory requirements of the role. About £580,000 of PAYE and National Insurance for 2014 to 2015 and 2015 to 2016 was at stake, and ICAEW reported that HMRC was considering its position.

The Atholl House remitted decision shows the same factor cutting the other way. ESM7335 records that the tribunal treated the extent of the mutual obligations as one of the features pointing towards employment for a presenter committed to 160 programmes a year, even though it found the case finely balanced.

The lesson is that thin obligations seldom win at stage one, but the degree of commitment on each side can carry real weight at stage three.

How does HMRC’s CEST tool deal with mutuality?

ESM11036 explains that CEST asks whether there is, or will be, a contract in place, citing PGMOL for the basic requirements of mutuality. Answering no stops the user going further, and answering yes does not affect the determination. CEST therefore treats mutuality only as the stage one gateway and does not weigh its extent.

How does this apply to typical contracts?

Illustration only.

Rolling contracts. A project manager has a series of three month contracts with a bank, paid a day rate, with two weeks’ notice and no duty on the bank to renew. During each contract the bank must pay for days worked and the manager must work them, so stage one is met for each contract. Arguing a lack of mutuality because the bank need not renew will not work after PGMOL and Northern Lights. The case turns on control and the third stage factors.
Occasional bookings. A photographer accepts ad hoc shoots from an agency list and can turn any down or withdraw without penalty. Each shoot still meets stage one, but the light commitment on both sides is a factor that can point away from employment in the overall evaluation, as in the remitted PGMOL decision.

What mistakes come up most often?

Relying on a clause saying the client need not offer further work as if it settled status.
Confusing a framework agreement with the individual engagements made under it.
Treating a cancellation right before work starts as removing mutuality, which PGMOL rejected.
Ignoring the extent of the obligations at the evaluation stage, where it can genuinely help or hurt.
Assuming that because mutuality is present, the contract must be employment. The right of substitution, financial risk and business on own account still have to be weighed.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.