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Law guide

Employees, workers and the self-employed

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Differences between employees, workers and the self-employed

There are three main categories of working individuals: employees, workers and self-employed.

The definition of employee and worker differs slightly from one area of legislation to another, but generally if rights apply to a worker they also apply to an employee. Employees have additional rights that don't apply to workers.

If you are self-employed for tax purposes, you're normally self-employed for employment rights purposes.

Employees

The majority of people in work are employees. You're classed as an employee if you're working under a contract of employment. A contract need not be in writing – it exists when you and your employer agree terms and conditions of employment. It can also be implied from your actions and those of the person you are working for. Your contract will normally set out what you're expected to do. You'll usually be expected to do the work yourself, i.e. you can't send someone else to do your work for you.

For more information see our 'Employment contracts' section.

Rights of employees

As an employee, your employer is obliged by law to deduct Income Tax and National Insurance Contributions (NIC) from your salary or wages before paying them to you. You're also entitled to all minimum statutory employment rights including:

  • Maternity, adoption and paternity leave
  • The right not to be unfairly dismissed
  • Statutory redundancy pay
  • All the rights that are given to 'workers' (below)
Worker

This is a broader category than 'employees', but normally excludes those who are self-employed. A worker is any individual who works for an employer, whether under a contract of employment or any other contract where an individual undertakes to do or perform personally any work or services. Workers are entitled to core employment rights and protections. The following groups of people are likely to be workers but not employees:

  • Most agency workers
  • Short term casual workers
  • Some freelancers
Rights of workers

Providing that any other qualifying conditions are met, all workers have rights:

  • To the National Minimum Wage
  • Under the Working Time Regulations, to rest breaks, paid holiday etc.
  • To protection against unauthorised deductions from pay
  • To maternity, paternity and adoption pay (but not leave)
  • To protection against less favourable treatment because of being part-time
  • To Statutory Sick Pay
  • To protection against less favourable treatment if you make a disclosure in the public interest (often called 'whistleblowing')
  • Not to be discriminated against unlawfully
Self-employed

If you're self-employed, you do not have a contract of employment with an employer. You're more likely to be contracted to provide services over a certain period of time for a fee and be in business in your own right. You'll also pay your own tax and National Insurance Contributions (NIC).

You do not have employment rights as such if you're self-employed, since you are your own boss and can therefore decide, for example, how much to charge for your work and how much holiday to give yourself.

However, you do have some legal protection. For example, you mustn't be discriminated against and you're entitled to a safe and healthy working environment on your client's premises.

Self-employed women who have recently left their jobs may be entitled to maternity allowance. Women who work in an unpaid capacity in the business of a self-employed spouse or civil partner and who give birth on or after 27 July 2014 can receive a weekly maternity allowance. This will be payable for a maximum of 14 weeks.

It is possible, in some limited cases, to be self-employed for tax purposes, but classified as a 'worker' or an 'employee' for employment rights purposes.

This can occur because Employment Tribunals (Industrial Tribunals in Northern Ireland) or courts may not consider all of the same facts when considering classification for employment rights purposes that HM Revenue and Customs, the Commissioners (who rule on tax and National Insurance matters) or courts do when considering classification for tax and National Insurance purposes.

How to work out your employment status for employment rights

There is no one thing that completely determines your employment status. If there is a dispute about your status between you and the person or company for whom you work, an Employment Tribunal (Industrial Tribunal in Northern Ireland) will make its decision based on all the circumstances of a case.

The sort of things the tribunal will look at fall into four main categories. Below are some questions to help explain what the categories mean. Try thinking about it as a sliding scale with 'employee' at one end and 'genuinely self-employed' at the other.

The more questions you answer 'yes' to, the more likely it is that you are self-employed. If you answer 'no' to most of the questions, then you are likely to be an employee. If you answer yes to some of the questions – in particular, questions such as: you can decide when you will work and can turn down work when offered; your employer offers work only as it becomes available, and you are not in business on your own account, you are likely to be considered a worker rather than an employee.

Remember that this is for guidance only and a definitive answer can only be given by an Employment Tribunal (Industrial Tribunal in Northern Ireland) or court. You should get advice from an expert if you are unsure.

The four main categories and associated questions are:

1.) Control: the extent to which the employer decides what tasks you do and how you do them

  • Do you have the final say in how the business is run?
  • Can you choose whether to do the work yourself, or send someone else?
  • Can you choose when and how you will work?
2.) Integration: the extent to which you're part of the organisation

  • If you need assistance, are you responsible for hiring other people and setting their terms of employment?
  • Are you excluded from internal company matters such as corporate training and staff meetings?
  • Are you exempt from having action taken against you using the company disciplinary procedure?
  • Are you excluded from company benefits and pension schemes?
3.) Mutuality of obligations: the extent to which your employer is required to offer you work and whether you're expected to do it

  • Does your employer offer work only if and when it is available?
  • Can you decide when you will work and can you turn down work when offered?
4.) Economic reality: the extent to which you bear the financial risk

  • Are you responsible for meeting the losses as well as taking the profits?
  • Are you responsible for correcting unsatisfactory work at your own expense?
  • Do you have to submit an invoice to the company for your pay?
  • Do you get a fixed payment for a job (including materials and labour)?
  • Do you provide the main items of equipment needed to do the job?
  • Do you work for a range of different employers?
What to do if you have problems

If you have a disagreement with your employer about your status and associated rights (for example, if your employer is refusing you holiday pay because they say you're self-employed), try to resolve the matter with them directly first of all. If you have a workplace representative (e.g. a trade union official), they may be able to help.