Employment status

Workers and employees

Every employee is also a worker, but not every worker is an employee. All employees are entitled to employment protection rights - though some rights require a minimum period of continuous service.

A number of other rights, such as the National Minimum Wage and regulations on working time, are also available to the wider category who qualify as workers.

Contracts
A person's employment status will depend on whether their contract is a contract of employment or a contract for services.

An employee is someone who works for you under the terms of an employment contract. A contract of employment could be written, oral or implied.

A worker is any individual person who works for you, whether under a contract of employment with you or not, who provides a personal service, eg a casual worker, agency worker or some freelance workers.

The Law
Case law, particularly regarding casual and agency workers, is still evolving. For income tax and National Insurance contribution purposes, workers provided by an agency are treated as employees of the agency.

There is no precise formula clarifying who is an employee, who is a worker and who is self-employed. However, there are four key tests the courts will consider:

• control - whether you as an employer can instruct them how and which tasks to perform
• integration - whether they are part and parcel of your organisation
• mutuality of obligations - whether you are required to offer work and they are expected to do it
• economic reality - whether they are in business on their own, eg where they bear the financial risks of failure to deliver the service

Recent trends have been towards the application of a "composite test" which takes account of all relevant factors. However, the law is complex and you should take advice if you are unsure of the employment status of someone who works for you.

Subjects covered in this guide

• Introduction
• Workers and employees
• Am I legally classed as self-employed?
• Employment status of company directors
• IR35 and other special rules

 Print This Page

Source - Business Link; Crown Copyright.