Employment Status

Employment Status

What does this mean and why is it important?

Employment status relates to what type of worker you are, for example whether you are an employee, an agency worker or self-employed.  It is important to establish this at the outset of any employment relationship or in the event a dispute at work should arise.  This is required because your employment status will determine what legal rights (if any) you may have at work, for example whether you are entitled to holiday pay.

So what’s the status quo?

There are currently 3 recognised categories of worker as defined by law.  These are:
  • Employee – an employee is defined as “an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment”
  • Worker – a worker is defined as “an individual who has entered into or works under (or, where the employment has ceased, worked under) (a) a contract of employment, or (b) any other contract, whether express or implied, whether made orally or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not be virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”; and
  • Self-employed – a person is self-employed if they run their own business and take responsibility for its success or failure.
It should be noted however, that despite the definitions set out above, it is rarely straightforward in determining which category you may fall into and it is often a question of fact and law as there are a number of factors that need to be considered on a case by case basis. With this in mind, you should always seek legal advice, particularly given the waters continue to be muddied in relation to the term “worker”.

So how do you know if you are a Worker?

All employees are in fact “workers” but the definition of a worker has been subject to much scrutiny by the courts and tribunals.  This is because there are many different types of workers, for example, agency workers, consultants, casual workers and fixed term workers.
In order to determine “worker “status, one must look at the type of contract that exists between the parties, whether the individual undertakes to do or perform services personally under that contract (or whether a substitute can be provided), whether there is a mutuality of obligation, namely for work to always be provided and work to be always be accepted and whether the status of the “employer” is that of a customer of a business or undertaking, or client of a profession, carried on by the individual. All of these factors will need to be considered on a case by case basis and for this reason, you should always seek legal advice if you are unsure about your employment status. Ultimately however, this will be a decision for the tribunal.

What is the “gig economy” and the effects of this?

This is a term which effectively represents short-term and unpredictable working arrangements where individuals are engaged by businesses on a flexible, ad-hoc basis.  Such arrangements have presented numerous problems in determining employment status for the purposes of employment rights as well as tax liability.  There is a concern that some businesses have sought to use this label specifically to avoid tax implications and to cut the costs of employing workers. 
It is therefore important to determine whether a worker who is labelled as such, is in fact a worker or genuinely self-employed. This is because genuinely self-employed individuals do not have employment rights.  Workers on the other hand will be entitled to the following:
  • Receiving the National Minimum Wage;
  • Protection against unlawful deductions from wages;
  • Statutory holiday pay;
  • Rest breaks;
  • To not work more than 48 hours on average per week unless they have chosen to opt out
  • Protection against unlawful discrimination;
  • Protection for “whistleblowing”; and
  • To not be treated less favourably if they work part time.
Workers may also be entitled to statutory sick pay, statutory maternity, paternity or adoption pay and shared parental pay.

What legal rights does an employee have that a worker does not?

Employees essentially have the highest level of protection in respect of employment rights and have the following additional rights to that of a worker:
  • Statutory Sick Pay;
  • Statutory maternity, paternity, adoption and shared parental leave and pay (workers are only entitled to pay);
  • Minimum statutory notice periods;
  • Protection against unfair dismissal;
  • The right to request flexible working;
  • Time off for emergencies; and
  • Statutory redundancy pay.
It should be noted that eligibility for some of these rights will be subject to a minimum length of continuous employment.
It should further be noted that an individual may not have the same employment status for all purposes and a court or tribunal may apply different tests depending on the cause of action involved. For example, an individual’s employment status may be different for the purposes of tax liability.