Employee, worker or self-employed? Does it really matter?

An individual doing paid work in the UK falls into one of three main categories:

  • an employee
  • a worker
  • self-employed

Some employers are understandably uncertain about the differences between ‘workers’ and ‘employees’ and the different rights which apply to them. The differences are determined by what are known as ‘common law tests.

Employment status is significant because employers will be liable for the majority of employment rights if those working for them are employees rather than self-employed.

The definition of ’employee’ and ‘worker’ differs slightly from one area of legislation to another, but generally workers have fewer rights than employees. However, if rights apply to a worker they usually also apply to an employee. The basic employment rights for employees and workers are listed below.

Employees

People are classed as employees if they work under a contract of employment. A binding contract can be created in writing, or verbally, or be a mixture of both, but certain terms do then have to be put into writing (currently within two months of the employee starting work – this will become a day-one right from April 2020).

The definition of ‘employee’ contained in employment legislation is unhelpful. For example, the Employment Rights Act 1996 defines an employee as ‘an individual who has entered into or works under (or, where employment has ceased, worked under) a contract of employment.’

Therefore the issue of employee status has to be established on a case-by-case basis in accordance with the various legal tests which have evolved over the years – the case involving Uber drivers and subsequent case law on this issue illustrate how important court and tribunal judgments are in this area.

The majority of people in work are employees. For example, a social media marketing manager who has worked exclusively for a company for 4 years between 9am and 5pm at the company’s offices is likely to be an employee, even if she only works part-time for 2 days a week.

Employee rights include:

  • protection against unfair dismissal
  • statutory redundancy payment
  • maternity and paternity leave and pay
  • parental leave
  • the right to request flexible working
  • rights under TUPE
  • rights to preferred payments in the event of an employer’s insolvency.

Workers

The term ‘worker’ has a distinct legal meaning.

A worker is any individual who undertakes to do or perform personally any work or service for another party, whether under a contract of employment or any other contract. It does not matter if the contract is express or implied, verbal or in writing, provided the individual undertakes to perform the work or services personally, for an end-user who is not a client or customer. This normally excludes those who are self-employed. This is based on a section in the Employment Rights Act 1996, but the definition of worker varies from statute to statute.

Agency workers and short-term casual workers are likely to be workers, unless they are found to be self-employed.

For example, an electrician working for a building company on several occasions over the course of a year was required to perform the work personally under the direction of the company, and was paid on a ‘time worked’ basis, rather than by reference to the work he performed. He was, therefore, more likely to be a worker than an employee.

Workers are entitled to some rights and protections, including the national minimum wage, paid annual leave, rest breaks and protections for part time workers.

If you would like more information please call one of friendly professional advisers on 01386 751740 or email [email protected]

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