Find out what your employment status is and have a solid understanding of what it means for you if you have a job in the United Kingdom. This is one of the most important things you should do when considering taking on a new role, particularly if you’re freelancing or contracting.
Even though it is an organization’s responsibility to declare the employment status of their workers, you as an employee also should make sure you know your employment status and understand how this affects you, particularly in regards to paying taxes.
What Does Employment Status Mean?
An individual's "Employment Status" refers to the employee-employer relationship and refers to the legal classification of the person being employed by the organization in the United Kingdom.
The Different Employment Statuses in the UK
According to the UK Government website, there are five types of employment statuses in the UK. However, a person's job status for the purposes of taxation may not be the same as that for the reasons of employment rights; therefore, it is strongly suggested that you utilize the specialized tool provided by HMRC to determine your employment status for the purposes of taxation.
Here are the five employment status classifications:
Self-employed
Under the laws governing employment in the UK, people who are considered to be "self-employed" have fewer rights and protections than those who are deemed as “employed”. This is because people who are self-employed are considered to be their own bosses and typically run their own businesses, which means they are solely accountable for when and how they work.
People are considered "self-employed" if they:
Are the owner of a company or are a freelancer
Are wholly responsible for how and when they work
Have to invoice for their pay instead of receiving a regular wage
Obtain contracts to provide their services and are allowed to subcontract those services
Can work for multiple clients and charge them different fees.
Legal protection from the employer does not usually come as standard when working as a self-employed contractor or freelancer. The primary reason for this is that they are accountable for their own health and safety, in addition to the rights they have against discrimination. Therefore, it is recommended to have any legal safeguards and boundaries that they want to have written down in a contract that both parties need to sign in order for it to be valid.
For more information on this, check out our guide to freelancer contracts.
Worker
This status is frequently referred to as the "in-between" status because workers are neither recognized to be self-employed nor employees of a firm. When compared to people who are self-employed, they do have more rights, but they do not have as many rights as workers do.
You can determine if someone is defined as a "worker" if they:
Have a written or unwritten contract or agreement to provide specific services in exchange for a reward. The "reward" could be monetary in nature or other benefits
Have the limited right to subcontract the work they agreed to do
The work provided is somewhat casual in nature, but the employer must ensure that there is work to be done for as long as the contract or agreement is in effect
Are not providing the agreed service under a limited company
Those who participate in the gig economy, including workers on casual and zero-hour contracts, agency workers, and seasonal workers, are most likely to be considered "workers" under this definition. Anyone who is considered a "worker" is eligible for a variety of employment rights, including the following:
Being paid the National Minimum Wage
Legal protections against unlawful wage deductions
The legal minimum amount of paid holiday
The maximum working hours of 48 per week on average
Legal protections against discrimination and for whistleblowers
Discrimination protections for those who work part-time
On the other hand, people who are considered "workers" typically do not have the right to certain protections and benefits, including minimum notice periods for dismissal, protections against unfair dismissal, the right to request flexible working conditions, time off for emergencies, and statutory redundancy pay.
Employee
According to the law of the UK, additional employment rights are extended to anyone who is classified as an "employee," even if technically all employees are also considered "workers." Workers don't typically have the same burdens of responsibility as employees do. Hence, employees have additional obligations.
People will be considered an employee if they:
Are expected to work on a regular basis, except for when they have approved leave
Are expected to work a minimum amount of hours per week and can expect to be paid regularly for the work done
Are not responsible for their workload and instead is allocated work by a manager or supervisor who also determines when and how the work should be done
Are expressly forbidden to subcontract the work they've agreed to do
have a specific amount of paid holiday per year and are entitled to receive Statutory Sick Pay, as well as maternity or paternity pay
Are allowed to join the company's pension scheme
Have an employment contract that explicitly uses terms like "employee" and "employer".
Employees have more legal rights and protections than workers or the self-employed do. These include the right to statutory sick pay and statutory redundancy pay; maternity, paternity, adoption, and shared parental pay and leave; a minimum notice period; protections against unfair dismissal; the right to request flexible working; and time off for emergencies. Workers do not have these legal rights and protections.
However, just because the employed are entitled to more benefits and legal protection does not mean it is always the favorable way to work. Check out our article debunking the myths around independent workers vs full time employees to see what the real pros and cons are.
How to Check Your Official Employment Status
Asking your employer is the easiest way to determine your employment status and your contract should also clearly determine your employment status. It’s always important to have a clear determination when starting new work so that you have clarity around expectations from the beginning.
You can also use the HMRC tool for determining employment status for tax is a great way to determine what your legal employment status may be.
However, if you are still unsure as to whether or not you are an employee, worker or self-employed, it would be wise to seek advice. What employment status you fall under will determine how much income tax and National Insurance you pay each month and determines the legal protections you may or may not have under UK law.