What Are The Three Different Types of Employment Status?

A person’s employment status is what defines the rights and employment protections an individual is entitled to whilst at work, and therefore determines what is required from the employer.

Employees will have different rights depending on their employment status, and therefore, it’s important for businesses to understand the different types of employment status so the right one can be used at the point of hire.

Under UK employment law, there are three key types of employment status:
• Employees working under a contract of employment, who have full employment rights;
• The genuinely self-employed, who are independent contractors; and
• Workers, who have a status in between employment and self-employment.

An employee is a person who works under the conditions of a contract of employment. To have employee status:
• an individual must be obliged to do the work personally;
• the employer needs to be obliged to provide the work and the employee is obliged to accept the work; and
• the employer needs to have some control over the way the employee carries out work.

Employee rights include:
• protection against unfair dismissal after 2 years’ service;
• statutory redundancy pay, after 2 years’ service;
• maternity and paternity leave, pay is subject to eligibility;
• parental leave, ;
• the right to request flexible working, employees must have worked for the same employer for at least 26 weeks to be eligible;
• rights under TUPE; and
• rights to preferred payments in the event of an employer’s insolvency.

A person is self-employed if they are their own boss, are running their own business and are solely responsible for its success. They are not protected by the employment rights enjoyed by employees, simply because they don’t have an ‘employer’ in the same way.

If someone is self-employed then the following will be present;
• they are responsible for how and when they work;
• they are able to send someone else to do the work, if appropriate;
• they are able to work for different clients and charge different fees;
• they don’t get holiday or sick pay when they’re not working; and
• they submit invoices once their work is done.

A self-employed worker may have a contract in place, which will set out the obligations or rights they have in relation to the business that pays them for their work.

Worker status is sometimes seen as a ‘half-way house’ between employee and self-employed status. A person is generally defined as a ‘worker’ if:
• they have an arrangement to perform work or services;
• they have to turn up for work even if they don’t want to;
• they cannot subcontract their work out to other people; and
• they aren’t doing the work as a limited company.

Typically, workers include casual workers, zero-hour contract workers, agency workers, freelancers and seasonal workers.

The rights that workers are entitled to include:
• receiving the National Minimum Wage;
• statutory minimum holiday pay;
• to not work in excess of 48 hours a week on average, or have the option to opt out of this right if they so choose;
• to not be treated less favourably if they work part-time;
• protection against unlawful discrimination; and
• the statutory minimum length of rest breaks.

All businesses need to understand the difference between the employment rights of employees, the self-employed and workers. Which status applies also has significant tax implications.

Typically, employment status issues occur when there is a dispute between a business and an individual working for it. In addition, with the growth of the gig economy where payment is per job, and a lack of guaranteed hours and job security for worker, this has led to a stream of tribunal cases. Uber recently lost their appeal over their driver’s employment status, ruling them as ‘workers’ rather than Uber’s claim that they are self-employed.

It is an employer’s responsibility to correctly establish the employment status of their workers, that is whether they directly employee them or they are self-employed. When hiring someone new it is essential for businesses to think about the kind of work required by the individual in order to select the right type of employment status. Different types of employment status demand different things of the employer and employee.
It is important for employers to know and understand the employment statuses of their employees and their rights and responsibilities to their people.

If you would like further guidance or support on this matter or require advice on other people management matters please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk

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