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What is employment status? Advice for employers and employees

Are you a worker or employee? If you work for someone, their responsibilities to you can vary substantially depending on your employment status.

Woman in an orange jumper working at a laptop indicating questions about what is employment status?

As we have seen highlighted in recent years with the rise and regulation of the gig-economy, businesses have responsibilities to individuals working in or at their premises and these can vary substantially depending on an individual’s employment status.

For employers, it is important to understand whether an individual is classified as an employee, a worker or self-employed, to determine which rights are relevant. Employment status also determines the employment related taxes that both the employee in question and the employer must pay.

For those in standard, regular employment – who are likely to be classified as employees – this may more straightforward than those with more casual work arrangements such as zero hours contracts.

The employment contract does not automatically determine the employee’s employment status and one should carefully examine the working relationship and the degree of control exerted by the employer over the employee.

What is employment status?

There are three main kinds of employment status:

Employee

  • The employer is likely to have extensive control over the individual’s work and will be expected to work regularly, accepting direction from the employer with a minimum agreed number of hours.
  • The employee is normally required to carry out the work themselves (not appoint someone else to do it in their place) and would be paid a regular wage.
  • The employee is entitled to all employment rights, although certain rights are only acquired after a minimum length of service, e.g. two years to be able to bring an unfair dismissal claim. An employee can expect: parental leave and pay; shared parental leave and pay; maternity, paternity and adoption leave and pay; parental bereavement leave and pay; time off for dependants and public duties (such as jury service); a minimum notice period if dismissed or made redundant; the right to flexible working requests after 26 weeks’ continuous service and protection against dismissal or suffering any detriment if taking action over a health and safety issue.

Worker

  • Their employer exerts a degree of control e.g., the wearing of uniform.
  • A worker has fewer responsibilities towards their employer and more flexibility over when, how much and where they work.
  • A worker is still in the main expected to carry out their work themselves.
  • A worker is entitled to some employment rights, such as holiday pay, national minimum wage and protection against unlawful discrimination.

Self–employed

  • Self-employed contractors generally enjoy more freedom and flexibility as they are run their own business, and how and when they work.
  • They can negotiate the price for their work (usually an overall fee for a project or series of tasks) and can appoint someone else to carry out the work in their place at their own discretion.
  • Generally, a self-employed contractor has limited employment rights – such as protection from unlawful discrimination.

What if my employment status is not clear?

The nature and frequency of your work may be less obvious in some types of employ, such as zero-hours staff, working via online platforms, if you are on work experience or an internship, an employee shareholder, locum or peripatetic (and have no fixed work base, such as a visiting music teacher). If you are not sure of your employment status, see how closely your situation fits one of the three listed examples of status. You may wish to look at any agreements or documents you have with your employer and check the reality of any written description with the working reality. It is very possible that you believe yourself to be self-employed under a written contract, but actually your situation (with regards to control over how and when you work) means you are more likely to be classed as a worker or employee. As a result, the benefits you could expect might be different.

What about fixed-term employment?

Regardless of the individual’s employment status at the time of their engagement, this also needs to be kept under review to ensure that it continues to reflect the on-going reality of the relationship, over the course of the contract. A working arrangement may have evolved into something different or need to be tweaked to reflect ongoing changes in the law. This not only ensures that the individual under the fixed-term contract benefits from the correct associated rights and responsibilities, but it will also assist both the organisation and the individual in ensuring that the correct employment-related taxes are paid, such as IR35, and avoid expensive and time-consuming legal challenges from the individuals, whatever their status.

If you’re still not sure about your own, or your employees, employment status, contact us.

This article was written by Omar Qassim

Please note the contents contained in this article are for general guidance only and reflection the position at time of posting. Legal advice should be sought before taking action in relation to specific matters.

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