In employment law a person’s employment status helps determine their rights, and their employer’s responsibilities.

In tax law a person may have a different employment status. You can check this using the HM Revenue and Customs (HMRC) Employment Status Indicator.

The main types of employment status are:

• worker
• employee
• self-employed and contractor
• director
• office holder

Contact Acas (or the Labour Relations Agency in Northern Ireland) if you need advice on employment status, employee rights or employer responsibilities.

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As a last resort you can take a case to an employment tribunal (known as an industrial tribunal in Northern Ireland) or a court and they’ll make the final decision on someone’s employment status for employment law purposes.

A person is generally classed as a ‘worker’ if:

• they have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written)
• their reward is for money or a benefit in kind, eg the promise of a contract or future work
• they only have a limited right to send someone else to do the work (‘subcontract’)
• they have to turn up for work even if they don’t want to
• their employer has to have work for them to do as long as the contract or arrangement lasts
• they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client

Employment rights

Workers are entitled to certain employment rights, including:

• getting the National Minimum Wage
• protection against unlawful deductions from wages
• the statutory minimum level of paid holiday
• the statutory minimum length of rest breaks
• to not work more than 48 hours on average per week or to opt out of this right if they choose
• protection against unlawful discrimination
• protection for ‘whistleblowing’ (reporting wrongdoing in the workplace)
• to not be treated less favourably if they work part-time

They may also be entitled to:

• Statutory Maternity Pay
• Ordinary Statutory Paternity Pay
• Statutory Sick Pay

Agency workers have specific rights from the first day at work.

Workers usually aren’t entitled to:

• minimum notice periods if their employment will be ending (eg if an employer is dismissing them)
• protection against unfair dismissal
• the right to request flexible working
• time off for emergencies
• Statutory Redundancy Pay

Casual or irregular work

If someone does casual or irregular work for a business and most of the statements below apply to them, it’s likely they’re a worker:

• they occasionally do work for a specific business
• the business doesn’t have to offer them work and they don’t have to accept it - they only work when they want to
• their contract with the business uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar
• they had to agree with the business's terms and conditions to get work (either verbally or in writing)
• they are under the supervision or control of a manager or director
• they can’t send someone else to do their work
• the business deducts tax and National Insurance contributions from their wages
• the business provides materials, tools or equipment they need to do the work

An employee is someone who works under an employment contract.

A person may be an employee in employment law but HM Revenue and Customs (HMRC) may regard them as having a different employment status for tax purposes.

Employment rights

All employees are workers, but an employee has extra employment rights and responsibilities which don’t apply to workers who aren’t employees.

These rights include all of the rights workers have and:

• Statutory Sick Pay
• maternity, paternity and adoption leave and pay
• minimum notice periods if their employment will be ending (eg if an employer is dismissing them)
• protection against unfair dismissal
• the right to request flexible working
• time off for emergencies
• Statutory Redundancy Pay

Some of these rights require a minimum length of continuous employment before an employee qualifies for them. An employment contract may state how long this qualification period is.

Working out employment status for an employee

Someone who works for a business is probably an employee if most of the following are true:

• they’re required to work regularly unless they’re on leave (eg holiday, sick leave or maternity leave)
• they’re required to do a minimum number of hours and expect to be paid for time worked
• a manager or supervisor is responsible for their workload, saying when a piece of work should be finished and how it should be done
• they can’t send someone else to do their work
• the business deducts tax and National Insurance contributions from their wages
• they get paid holiday
• they’re entitled to contractual or Statutory Sick, Maternity, or Paternity Pay
• they can join the business’s pension scheme
• the business’s disciplinary and grievance procedures apply to them
• they work at the business’s premises or at an address specified by the business
• their contract sets out redundancy procedures
• the business provides the materials, tools and equipment for their work
• they only work for the business or if they do have another job, it’s completely different from their work for the business
• their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’

An employee shareholder is someone who works under an employment contract and owns at least £2,000 worth of shares in the employer’s company or parent company.

Employment rights

Employee shareholders have most of the same employment rights as workers and employees.

They also have the right to collective redundancy consultation and transfer of undertakings (TUPE) - this protects the employee’s terms and conditions when the business is transferred to a new owner.

Employee shareholders don’t have the following rights:

• protection against unfair dismissal - apart from dismissal on grounds of discrimination and in relation to health and safety
• statutory redundancy pay
• the right to request flexible working - except in the 2 weeks after returning from parental leave
• certain statutory rights to request time of for training

Employee shareholders must give 16 weeks notice if they want to come back early from maternity leave, additional paternity leave and adoption leave.

Employers can choose more generous employment rights than the statutory ones.

Tax relief and obligations

Employee shareholders can get tax relief on the first £2,000 of shares but also have to pay tax on buying and selling shares.

HM Revenue and Customs (HMRC) has further guidance on tax relief for employee shareholders.

Applying for employment shareholder jobs

Anyone can apply for an employee shareholder job.

People claiming Jobseeker’s Allowance don’t have to apply for an employee shareholder job that Jobcentre Plus have told them about.

Existing employees don’t have to accept a change to an employment contract to become an employee shareholder if they don’t want to.

Offering employment shareholder status

Employers must following certain rules when offering employment shareholder status to their employees.

A person is self-employed if they’re in business for themselves. They must tell HM Revenue and Customs (HMRC) as soon as possible if they’re self-employed otherwise they may be fined.

Employment legislation does not generally cover self-employed people because they are, in effect, their own boss.

If a person is self-employed:

• they still have protection for their health and safety and, in some cases, protection against discrimination
• their rights and responsibilities would be set out by the terms of the contract they have with their client

HMRC may regard someone as self-employed for tax purposes but they might have a different status in employment law.

Contractors

A contractor can be:

• self-employed
• a worker or an employee if they work for a client and are employed by an agency

There is a special scheme for self-employed contractors and sub-contractors working in the construction industry called the Construction Industry Scheme (CIS).

Independent contractors: working out employment status

If most of the statements below apply to someone, it’s likely that they’re self-employed because they:

• put in bids or give quotes to get work
• have specific pieces of work or projects to do but decide how to do the work
• aren’t under direct supervision when working
• can hire someone else to do the work
• submit invoices for the work they’ve done
• are responsible for paying their own National Insurance contributions and tax
• don’t get holiday or sick pay when they aren’t working
• have to do unsatisfactory work again in their own time and at their own expense
• are responsible for losses and taking profits from their work
• can provide services to a number of different clients or customers
• operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’, or an ‘independent contractor’

Company directors run limited companies on behalf of shareholders.

Directors have different rights and responsibilities from employees, and are classed as office holders for tax and National Insurance contribution purposes.

If a person does other work that's not related to being a director, they may have an employment contract and get employment rights.

A person who’s been appointed to a position by a company or organisation but doesn’t have a contract or receive regular payment may be an office holder. This includes:

• statutory appointments, eg registered company directors or secretaries, board members of statutory bodies, or crown appointments
• appointments under the internal constitution of an organisation, eg club treasurers or trade union secretaries
• appointments under a trust deed, eg trustees
• ecclesiastical appointment, eg members of the clergy

Office holders are neither employees nor workers. However, it’s possible for someone to be an office holder and an employee if they have an employment contract with the same company or organisation that meets the criteria for employees.

Working out employment status for an office holder

If most of the statements below apply to someone, it’s likely that they’re an office holder:

• there is no contract or service agreement relating to their appointment
• their duties are minimal, and are only those required under the relevant statute, constitution or trust deed
• they don’t get a salary or any other form of regular payment for their services
• the only payment they get is a voluntary payment (‘honorarium’), regardless of the work they do - tax and National Insurance are deducted by the appointing body
• they’re effectively working as an independent office, and are not under the close supervision or control of the appointing body

A court or employment tribunal (known as an industrial tribunal in Northern Ireland) can make a final decision on employment status. They will look at how the employment relationship between the person and the business works in practice.

HM Revenue and Customs (HMRC) may regard someone as self-employed for tax purposes. However, an employment tribunal or court may still make a decision that they are a worker or employee for employment rights purposes.