There are 3 main types of employment status; employed, worker or self-employed. Each of these have different employment rights and employer responsibilities and obligations and it is therefore important you ascertain which is the right employment status for an individual working for your organisation.
In order to test someone’s employment status, you should consider these three principle tests:
- Whether they are providing a personal service i.e. whether they are able to send a substitute to carry out work in their place.
- Whether you as the employer are obliged to provide them with work and whether they are obliged to undertake the work in return for an agreed salary, under certain terms and conditions.
- Whether the employer has a sufficient degree of control over the employee.
If an individual is required to personally provide the service, obliged to take pre-agreed work that you are obliged to offer them, and you have control over what, when and how they deliver this work, it is most likely they are an employee. They will usually be employed under a contract of employment.
If someone has the ability to freely reject any work offered to them without penalty, however there is some degree of control once they accept the offer of work, they are likely to be a worker. They will still have to work to the terms of their contract of employment, however the terms are not as stringent as an employee.
Where none of the three tests are met, the individual is likely to be a self-employed independent contractor, running his or her own business, rather than a worker or employee.
It is important you get this distinction correct when deciding on the appropriate contract for an individual as this not only affects their employment rights, but it also affects your obligations to them as an employer. For example, you are required to deal with their tax and NI during the payroll process as well as the employee having the right to paid holiday and right to protection against unfair dismissal, amongst many others.
Workers have some of these rights e.g. the right to statutory amount of paid holiday, the right to be paid the minimum wage amongst others however they do not have protection against unfair dismissal or statutory redundancy pay.
A self-employed person does have the right to paid holidays, statutory redundancy pay or cover in terms of most employment law. It is important to remember however, they still have protection for their health and safety. Their rights and responsibilities will be determined by the contract they hold with their client.
If you need any help or advice with any HR issues then please do get in touch.
