Employment Status - Who's who?

A person’s employment status is the key factor when defining the rights and responsibilities that someone has in the workplace. These rights differ depending on the employment status and getting it right at the start is critical to avoid employment disputes later down the line.

When it comes to employment status, there are three main types: employee, worker, and self-employed contractor. Under employment law employees have the most rights, workers have some rights (but not all), and the self-employed usually have few rights.

What's an employee?

An employee works under an employment contract. While there are lots of different types of employee, from full-time to part-time and flexi-time employees, each must have work available to them from their employer, and they are obliged to accept the work.

Employers are entitled to have final say in how, when, and where the employee's work is completed. Employees' tax and National Insurance contributions are paid from their wages by their employer.

What's a worker?

A worker can be an agency worker or a freelancer, for example, who works under a written or verbal contract to provide services in exchange for money or benefits in kind.

They have limited right to outsource their work to others, they must always have work available to them from their employer for the duration of the contract, and they're obliged to accept work from their employer for the duration of their contract. However, if known as a 'zero hours worker', they're not entitled to receive work at all times and are not obliged to accept work offered to them.

If they are working through a recruitment agency, the agent pays the worker's tax through their wages and is responsible for their working-time regulations. To be a worker, the individual must not be working on behalf of their own limited company.

What's a self-employed contractor?

A self-employed contractor is self-employed as either a sole trader or as a part of their own limited company, and works under a contract for services that details the rights and responsibilities between the self-employed person and their client.

Self-employed contractors can choose what work they do, and they can decide when and where they complete the work. They are able to outsource work to others, they provide their own work equipment, and they often work for more than one client at a time. They're responsible for arranging for their own tax and National Insurance contributions.

It's important to fully understand whether you're hiring an employee or a self-employed worker. Getting it wrong can mean that you and the person you're hiring will face fines from HMRC.

Need Support?

Within the Legal Expenses cover provided by Covéa Insurance, policyholders have access to a Legal Advice Helpline. Whatever issues you may be facing as an employer, legal advisors can guide you through the complexities, support you along the way and reduce the likelihood of unnecessary litigation. Employment disputes are the most common cause of litigation, so engage with your Legal Expenses provider and utilise their helpline service to protect your business.

This article was originally published in our Commercial Newsletter. If you don't already receive it, why not sign up here? 

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