The next step

Employment status and rights: checklist for employers

[Weblink]

Determining someone’s employment status

Types of employment status

There are three main types of employment status: (1) employees; (2) workers; and (3) self-employed.

Employees

The statutory definition of an employee is someone who “has entered into or works under… a contract of employment” and this includes a contract of apprenticeship. Case law has also held that there are three key elements that must exist for someone to be an employee: (1) control - you must have sufficient control over the person and the way they perform the work, e.g. in deciding what should be done, how and when; (2) mutuality of obligation - you’re obliged to provide work and they’re obliged to do the work in return for pay; and (3) personal service - they must perform the work personally and can’t send a substitute in their place.

Tip. You won’t be able to get around personal service by putting an unfettered right of substitution into the contract if that clause is a sham.

If these three elements exist, other relevant factors will then be considered to see if they’re consistent with the person being an employee. These include: (1) whether they’re in business on their own account, e.g. they’re taking financial risk and sharing in the profits; (2) who supplies their equipment; (3) the level of their integration into your business; (4) the exclusivity of the arrangement; and (5) their salary and benefits. This list isn’t definitive.

What you call the contract is relevant but isn’t decisive as tribunals will look beyond labels and scrutinise the working reality of the relationship.

Employees enjoy full employment rights.

Workers

All employees are also workers, but not all workers are employees. A worker (A) must have entered into or work under a contract whereby they’ve agreed to personally perform work or services for another party to the contract (B). In addition, B must not be a client or customer of any profession or business carried on by A, meaning the genuinely self-employed aren’t workers. In this case, mutuality of obligation and personal service are both necessary elements of worker status but, in most instances, workers aren’t subject to the same degree of control and mutuality as an employee would be, e.g. they can reject an offer of work.

Workers have fewer employment rights than employees, but they do have some rights including the right to receive the national minimum wage, rights under the Working Time Regulations 1998 and protection against discrimination.

Self-employed

An individual will be self-employed if they’re not an employee or a worker. These persons normally have greater freedom to decide if, how, when and where to work. For example, they’re in business for themselves, they actively market their services and the other party is their client. The self-employed generally have no statutory employment rights; they only have contractual rights.

Tip. The government has produced a checklist for employers on employment status and rights (see The next step ).

For the government’s checklist, visit https://www.tips-and-advice.co.uk , Download Zone, year 26, issue 4.