The employment status of an individual affects both the way that National Insurance Contributions are paid as well as the rights of that individual. It is vitally important that an employer correctly engages their workforce using the correct status making sure they are aware of the significance and uses of each one and how to identify what category their workforce falls under. Our expert solicitors can guide you on each status and the implications of each and which are suited to your particular circumstances.
Categories of employment status
There are three main categories of employment status:
There are other categories that are less prevalent and these are considered below. The distinction between the above three categories are important since generally employees get greater protection than other categories:
- Certain legal protections, for example against unfair dismissal, only apply to employee status.
- The ACAS Code of Practice on Disciplinary and Grievance Procedures only apply to employees.
- Employers must have liability insurance against the risk of an employee injuring themselves during in the course of their employment.
It is therefore imperative that an employer can prove the status of an individual since this can affect the rights of an individual. The fact that someone is considered to be self-employed for tax purposes does not necessarily mean that an employment tribunal will determine the same.
An individual is an employee if they personally work to the terms within a contract without the right to provide a substitute. A contract is where there are terms covering pay, annual leave and working hours agreed between the employer and employee. To determine whether an individual is an employee the relationship needs to be examined in order to confirm:
- How the individual is paid.
- If there is control or direction by the employer over the individual.
- How holiday periods are granted.
- If there is a uniform and where tools are needed who provides them.
Employees enjoy the widest range of employment rights and will have all the rights of a worker as well as additional ones. These include:
- National minimum wage.
- Holiday pay.
- Maternity and paternity pay.
- Right to request flexible working hours.
- Right not to be discriminated against.
- Right to not be unfairly dismissed (generally after two years' service).
- A written statement of employment (the contract).
- An itemised pay slip.
An individual that is a worker generally personally performs their work to the terms of an employment contract. However, sometimes a worker can substitute someone else to perform their work, such as a sub-contractor. Workers include those performing casual, agency or seasonal workers as well as freelancers and those on zero hours. Workers still enjoy certain employment rights such as:
- National minimum wage.
- Holiday pay.
- Protection against unlawful discrimination.
- The right not to be treated less favourably where they work part-time.
A self-employed individual works for themselves and takes responsibility for their business's success or failure. They are generally contracted to provide a service for a client for a fee. Those individuals that are self-employed do not get paid through PAYE and do not have the same rights and responsibilities as either employees or workers. Generally, they do not have the right to holiday pay. However, they still are given protection regarding health and safety when on their client's premises and are sometimes protected against discrimination. The contract with their client covers their rights and responsibilities for that role.
Other forms of employment status
As well as the three main groups, an individual can fall under the following categories:
- An agency worker who is generally hired for a temporary period. The Agency Workers Regulations give the same basic working and employment rights to agency workers as those directly engaged by the client.
- Apprentices are school leavers aged 16 or above since they legally need to continue with their education until they are 18 years old. Apprentices take part in work-based training programmes that lead to qualifications. They are entitled to the apprentice national minimum wage (once they reach 19 they are then entitled to the national minimum wage).
- Interns are students and graduates that spend time within an organisation to gain skills and experience of that sector or industry. Their salary is determined by their employment status (for example if they are a worker or it is part of their further or higher education course).
- Volunteers perform non-paid work but should receive relevant training and development for the role. They often are paid their travel and lunch expenses.
- Employee shareholders work under an employment contract but also own at least £2000 shares in the employer's company or parent company. They have the same rights as worker and employees except that they do not have protection again unfair dismissal, statutory redundancy pay, right to request flexible working or statutory rights to request time off for training.
- Directors run a limited company on behalf of its shareholders and have different rights and responsibilities from employees. They are classified as office holders. Where a director also performs work not related to being a director it is possible they would have employee status.
- Office holders are appointed by a company but do not have a contract or receive regular payments. Their duties are generally minimal and their only payment is an honorarium with tax and National Insurance being deducted by the appointing body. They work independently without supervision from the appointing body.
Contact our Employment Solicitors in London
Our employment lawyers are experienced in dealing with a wide range of employment issues on behalf of both employers and employees. We can advise our clients on all employment issues, including the relevant employment status. We will do our best to resolve employer/employee issues as amicably as possible and can help you achieve an outcome that is agreeable to you, with your interests at the heart of everything we do.