Employment status – what’s in a name?

Recent media headlines regarding the so-called ‘gig economy’ have thrown the issue of employment status into the spotlight.

There are three main categories of employment status:

• Employee
• Worker
• Self-employed

But what is the difference and why have the lines apparently become so blurred in recent years?

Employees

Employees have a contract of employment and carry out the work personally. A contract states their terms such as pay, annual leave and working hours.

An employee’s rights include:

• Written statement of employment
• Itemised pay slip
• The right to be paid the National Minimum Wage or National Living Wage
• Holiday pay, maternity/paternity pay, statutory sick pay
• The right to request flexible working hours
• The right not to be discriminated against
• Right to claim redundancy after being with employer for two years

Workers

The title of ‘worker’ can be confusing and, in many regards, a person’s rights are similar to that of an employee. For example, a worker will also work according to the terms of a contract of employment and will usually carry out the work personally. However some workers may have a limited right to deputise the work to another, as is the case with sub-contractors.

Workers are entitled to certain employment rights including:

• National Minimum Wage/National Living Wage
• Holiday pay
• Protection against unlawful discrimination
• Protection against being treated less favourably if they work part-time

Self-employed individuals

Self-employed individuals typically run their own business. Because those who are self-employed typically contract out their services, they are not paid through PAYE.

This means they have far less employment rights than an employee or worker. However, a self-employed individual still has some rights including:

• Protection of their health and safety when on a client’s premises
• Certain protection against some discrimination
• Their rights and responsibilities will be set out in the contract they have with their client
• Not general entitled to holiday pay

To further confuse matters, certain individuals can be self-employed for tax purposes but then are classed as a worker or an employee for employment rights

Failing to categorise individuals correctly as either employees, workers or self-employed persons could be costly. Many business owners have found themselves in front of an employment tribunal for wrongly classifying employees or workers as ‘self-employed’ individuals.

Following the Taylor Review which investigated the rights of so-called ‘gig workers’, the Government has published the ‘Good Work Plan’ which includes:

• Enforcing vulnerable workers’ holiday and sick pay for the first time
• A list of day-one rights including holiday and sick pay entitlements and a new right to a payslip for all workers, including casual and zero-hour workers
• A right for all workers, not just zero-hour and agency, to request a more stable contract, providing more financial security for those on flexible contracts

However, the Government has not yet committed to any timelines for these proposals and has yet to present draft legislation for consultation.

At Moore Thompson, our experts are able to help with a wide range of HR matters including contracts of employment. To find out how we can support your business, please contact us.