Employment status

Worker

A person is generally classed as a ‘worker’ if they:

have a contract to do work or services personally
only have a limited right to send someone else to do the work (‘subcontract’)
aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client

Employment rights

Workers are entitled to certain employment rights, including:

getting the National Minimum Wage
protection against unlawful deductions from wages
the statutory minimum level of paid holiday
the statutory minimum length of rest breaks
not to work more than 48 hours on average per week or to opt out of this right if they choose
protection against unlawful discrimination
protection for ‘whistleblowing’ (reporting wrongdoing in the workplace)

They may also be entitled to:

Statutory Maternity Pay
Ordinary Statutory Paternity Pay
Statutory Sick Pay

Agency workers have specific rights from the first day at work.

Workers usually aren’t entitled to:

minimum notice periods if their employment will be ending (eg if an employer is dismissing them)
protection against unfair dismissal
the right to request flexible working
time off for emergencies
Statutory Redundancy Pay

Casual or irregular work

If someone does casual or irregular work for a business and most of the statements below apply to them, it’s likely they’re a worker:

they occasionally do work for a specific business
the business doesn’t have to offer them work and they don’t have to accept it – they only work when they want to
their contract with the business uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar
they had to agree with the business’s terms and conditions to get work (either verbally or in writing)
they are under the supervision or control of a manager or director
they can’t send someone else to do their work
the business deducts tax and National Insurance contributions from their wages
the business provides materials, tools or equipment they need to do the work

Employee

An employee is someone who works under an employment contract.

A person may be an employee in employment law but HM Revenue & Customs (HMRC) may regard them as having a different employment status for tax purposes.

Employment rights

All employees are workers, but an employee has extra employment rights and responsibilities which don’t apply to workers who aren’t employees.

These rights include all of the rights workers have and:

Statutory Sick Pay
maternity, paternity and adoption leave and pay
minimum notice periods if their employment will be ending (eg if an employer is dismissing them)
protection against unfair dismissal
the right to request flexible working
time off for emergencies
Statutory Redundancy Pay

Some of these rights require a minimum length of continuous employment before an employee qualifies for them. An employment contract may state how long this qualification period is.

Working out employment status for an employee

If most of the statements below apply to someone who works for a business, it’s likely they’re an employee:

they’re required to work regularly unless they’re on leave (eg holiday, sick leave or maternity leave)
they’re required to do a minimum number of hours and expect to be paid for time worked
a manager or supervisor is responsible for their workload, saying when a piece of work should be finished and how it should be done
they can’t send someone else to do their work
the business deducts tax and National Insurance contributions from their wages
they get paid holiday
they’re entitled to contractual or Statutory Sick, Maternity, or Paternity Pay
they can join the business’s pension scheme
the business’s disciplinary and grievance procedures apply to them
they work at the business’s premises or at an address specified by the business
their contract sets out redundancy procedures
the business provides the materials, tools and equipment for their work
they only work for the business or if they do have another job, it’s completely different from their work for the business
their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’

Self-employed

A person is self-employed if they’re in business for themselves. They must tell HM Revenue & Customs (HMRC) as soon as possible if they’re self-employed otherwise they may be fined.

Employment legislation does not generally cover self-employed people because they are, in effect, their own boss.

If a person is self-employed:

they still have protection for their health and safety and, in some cases, protection against discrimination
their rights and responsibilities would be set out by the terms of the contract they have with your client

HMRC may regard someone as self-employed for tax purposes but they might have a different status in employment law.

Contractor

A contractor can be:

self-employed
a worker or an employee if they work for a client and are employed by an agency

If a contractor is an employee and they provide their services through a third party (eg their own limited company), the employer doesn’t have to make National Insurance contributions (NICs) or deduct PAYE tax.

There is a special scheme for self-employed contractors and sub-contractors working in the construction industry called the Construction Industry Scheme (CIS).

A managed service company (MSC) is an intermediary company through which workers can provide services to clients. The MSC is responsible for paying workers’ NICs and PAYE tax.

Independent contractors: working out employment status

If most of the statements below apply to someone, it’s likely that they’re self-employed because they:

put in bids or give quotes to get work
have specific pieces of work or projects to do but decide how to do the work
aren’t under direct supervision when working
can hire someone else to do the work
submit invoices for the work they’ve done
are responsible for paying their own NICs and tax
don’t get holiday or sick pay when they aren’t working
have to do unsatisfactory work again in their own time and at their own expense
are responsible for losses and taking profits from their work
can provide services to a number of different clients or customers
operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’, or an ‘independent contractor’

Director

Company directors run limited companies on behalf of shareholders.

Directors have different rights and responsibilities from employees, and are classed as office holders for tax and National Insurance contribution purposes.

If a person does other work that’s not related to being a director, they may have an employment contract and get employment rights.

Office holder

A person who’s been appointed to a position by a company or organisation but doesn’t have a contract or receive regular payment may be an office holder. This includes:

statutory appointments, eg registered company directors or secretaries, board members of statutory bodies, or crown appointments
appointments under the internal constitution of an organisation, eg club treasurers or trade union secretaries
appointments under a trust deed, eg trustees
ecclesiastical appointment, eg members of the clergy

Office holders are neither employees nor workers. However, it’s possible for someone to be an office holder and an employee if they have an employment contract with the same company or organisation that meets the criteria for employees.

Working out employment status for an office holder

If most of the statements below apply to someone, it’s likely that they’re an office holder:

there is no contract or service agreement relating to their appointment
their duties are minimal, and are only those required under the relevant statute, constitution or trust deed
they don’t get a salary or any other form of regular payment for their services
the only payment they get is a voluntary payment (‘honorarium’), regardless of the work they do - tax and National Insurance are deducted by the appointing body
they’re effectively working as an independent office, and are not under the close supervision or control of the appointing body

Legal decisions on employment status

A court or employment tribunal (known as an industrial tribunal in Northern Ireland) can make a final decision on employment status. They will look at how the employment relationship between the person and the business works in practice.

HM Revenue & Customs (HMRC) may regard someone as self-employed for tax purposes. However, an employment tribunal or court may still make a decision that they are a worker or employee for employment rights purposes.