Employees, Workers and Self Employed Status – What You Need to Know

Do you know the difference between an employee and a worker and how to distinguish between the two? Are you aware of the implications of getting it wrong? Read more below to find out more and how to ensure that you don’t fall foul in this important area of employment law. 

In UK employment law, there are three principal categories of employment status:

·       Employees working under a contract of employment, who have full employment rights;

·       The genuinely self-employed, who are independent contractors; and

·       Workers, who have a status in between employment and self-employment

But be clear - these labels are just that – labels.  They don’t determine employment status; that depends on the terms of the contract and how the arrangements “operate in practice”.  

A business could have all three categories of employment status. Here’s an example of how a business could look :

·       A manager, reporting to the Managing Director, and fully integrated within the business, is likely to be an employee;

·       A freelance virtual assistant, running their own business, and working for other clients, is likely to be self-employed; and

·       Seasonal staff who are under no obligation to accept work when offered may be workers.

So, how do employment rights differ according to status?

Employees (not workers) have the right of:

·       Protection against unfair dismissal.

·       A statutory redundancy payment after two years’ service.

·       Minimum statutory notice.

·       Statutory maternity, paternity, adoption, and shared parental leave and pay, and statutory sick pay.

·       TUPE protection (provided TUPE applies to the transfer of undertakings concerned).

·       Request flexible working.

·       Paid time off for trade union duties and for ante-natal care, and unpaid time off to deal with emergencies for a dependant.

BOTH employees and workers are entitled to:

·       National Minimum Wage/National Living Wage.

·       A written statement of terms on the day the contract starts  

·       An itemised pay slip on or before the day payment is made 

·       Working time rights, such as weekly and daily statutory rest breaks, and a 48-hour maximum working week (although they can choose to opt out and work for longer).

·       A companion during a disciplinary or grievance hearing.

·       Protection from discrimination and from mistreatment following whistleblowing.

·       Protection from unlawful deduction from remuneration.

·       Health and safety protection.

·       Auto enrolment on to a pension scheme.

·       Paid annual leave.

Self-employed contractors have no employment rights but they are protected from:

·       Health and safety protection.

·       Protection from discrimination and from mistreatment following whistleblowing.

Beware – recent case law has highlighted the potential difficulties with determining whether someone is self-employed or, in fact, an employee.    Hairdresser Meghan Gorman successfully argued that the level of control over her working practices essentially made her an employee. The Employment Tribunal decided that she was an employee and was entitled to holiday pay, notice pay and redundancy. 

What is the difference between tax and employment conditions?

The legal tests for tax purposes and to determine employment rights are not the same, so an individual may be taxed as an employee but not have full employment rights.

The ‘worker’ concept only exists in employment law, and is a catch-all category used to provide those who would otherwise be self-employed, but who have some employee characteristics (such as a degree of control by the business), with meaningful legal rights.

Businesses must deduct income tax and National Insurance (NI) contributions, and pay employers’ NI, for both employees and workers. 

What should businesses be doing?

Businesses currently using a range of contracts, such as fixed-term, agency or zero-hours contracts, should consider whether these are still the right choice in terms of flexibility of resource, and the need for stability by those working for them. 

Statements of written particulars are required for employees and, from 6 April 2020, for workers too, setting out what rights they are entitled to. Employers’ legal obligation to provide an itemised pay slip for employees became a legal requirement for workers as well. 

It is good practice to ensure that all workers, or those on varying contracts, are aware of any vacant positions within the organisation, so they can apply for more stable contracts, if they so wish. This is a legal requirement for employees on fixed term contracts.

Modern working practice and how the law is changing

This area of law is likely to continue to change in the next few years, both as a result of the courts’ response to the new working practices typified by the “gig economy” and new legislation prompted by a major review (the Taylor report) which made a series of recommendations which the government accepted all bar one. This is known as ‘The Good Work Plan’.  The Good Work Plan was implemented from 6th April 2020.  

Read below to ensure that you are aware of those changes:

·       All workers will be entitled to a written statement of particulars as a right from day one of employment, itemising their basic terms and conditions and specifying probationary periods and family leave. 

·       Workers also gained the right to an itemised pay slip, and those on variable hours who have been with the same employer for at least a year will have their annual leave entitlement calculated using a 52-week reference period rather than 12 weeks as previously.

The government has also agreed – but has yet to produce draft rules - that workers, especially those on zero-hour contracts and agency assignments, should have the right to request more predictable and stable contracts after 26 weeks’ service.

A key aspect of gig economy work remains unaddressed: amending legislation to provide minimum rights, such as the national minimum wage, for those whom Taylor called “dependent contractors”.

How we can help your business – This is a complex area and one that may require specialist HR support. Our HR Consultants are here to help take the headache away so you can focus on your core business.  Whether it’s high level or detailed advice, get in touch. Call us today on 01527 306 760.

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