Understanding your employment status is more than just a bureaucratic necessity; it defines your legal rights and obligations in the workplace. There are three primary categories: Employee, Worker, and Self-employed.

Let's delve into each to demystify the complexities surrounding employment status.

Employee

The Employment Rights Act 1996 defines an employee as someone who:

• has entered into or works under a contract of employment or apprenticeship; and
• has a contract which is written or oral, with terms sometimes implied.

In addition:

• The employer has control over the work method.
• Factors like integration into the business, nature of engagement, and benefits received matter.

Worker

While all employees are workers, not all workers are employees. Being a worker entails:

• a contract to personally perform work or services for another; and
• the other party isn't a client or customer of your profession or business.

Self-employed

If you're self-employed:

• you have no obligation to provide personal service;
• there is no mutuality of obligation; and
• you are running a business where the other party is your customer.

When determining if someone is self-employed, the level of control, integration into the employer's business, active marketing, short-term engagements, providing specialist services, invoicing, supplying your equipment, and taking on risks are also taken into account.

Employment Status Tests from Case Law

Employment status tests depend on case-specific facts. Legal tests have evolved through case law which can help us determine the appropriate status, with personal performance and the right of substitution gaining prominence.

An individual is likely an employee if:

• There is an obligation to provide personal service.
• There is mutuality of obligation.
• The employer controls the work method.
• Other factors which align with employment are present (e.g holiday allowance, high integration with the business).

An individual is likely a worker if:

• There is an obligation to provide personal service.
• There is mutuality of obligation.
• They are not running a business, and the other party is not a customer.
• They don't otherwise meet the tests for being an employee.

An individual is likely self-employed if:

• There is obligation on them to provide personal service.
• There is no mutuality of obligation.
• They are running a business, with the other party as the customer.

Tax vs Employment Law

There are different tests for self-employment depending on whether you’re considering your employment status for tax or employment law purposes.  

Factors taken into consideration when determining whether an individual is self-employed for tax purposes include: autonomy, ability to make a profit or loss, hiring others, fixing unsatisfactory work, agreeing on a fixed price, using personal funds for business, working for multiple clients, and being in business for oneself.

Important Points:

• A person can be taxed as self-employed for tax purposes but still be considered an 'employee' or 'worker' for employment law purposes.
• Simultaneous employment and self-employment are possible.

In conclusion

If you’re unsure about your status, it’s always advisable to get legal advice, especially because the tax implications of getting it wrong can be significant.

Our team of employment lawyers are here to help.