What is mutuality of obligation?

Mutuality of obligation is one of the three key tests used by HMRC and employment tribunals to determine whether a working relationship is employment or genuine self-employment. It is a concept many founders have encountered in IR35 discussions without a clear understanding of what it actually means or why it matters to how a contractor engagement is structured.

Mutuality of obligation refers to the mutual expectation in most employment relationships: the employer is obliged to offer work, and the employee is obliged to accept it. In a genuinely self-employed relationship, there is no such mutual obligation — the contractor can decline work, and the client is under no obligation to provide a consistent stream of it. Where an arrangement creates an expectation on both sides that work will be provided and accepted on an ongoing basis, this points toward employment rather than self-employment.

Mutuality of obligation is assessed alongside other factors such as control — how much direction the client has over how and where work is done — and substitution, whether the contractor can send a substitute. No single factor is determinative; HMRC and tribunals look at the overall picture. Our guide to employment status and IR35 covers how these tests work and what they mean in practice for businesses engaging contractors.