Definition
The legal classification of an individual's working relationship, which determines their employment rights and tax treatment. The three main categories in UK law are employee, worker, and self-employed. The distinction affects entitlements to holiday pay, sick pay, unfair dismissal rights, and tax obligations.
UK Context
UK law distinguishes between employees, workers, and the self-employed. Employment status is determined by the reality of the working relationship, not the label given to it. HMRC's Check Employment Status for Tax (CEST) tool helps assess status for tax purposes. The Supreme Court's Uber judgment in 2021 clarified the worker status test.
Best Practices
- Assess employment status carefully using the established tests of personal service, mutuality of obligation, and control
- Do not attempt to avoid employment rights by labelling genuine employees as self-employed or contractors
- Review the status of anyone working regularly for the organisation, particularly if the arrangement has changed over time
Frequently Asked Questions
What is the difference between an employee and a worker?
Employees have all employment rights including unfair dismissal, redundancy pay, and statutory notice. Workers have some rights including minimum wage, holiday pay, and rest breaks, but not unfair dismissal or redundancy pay. Self-employed individuals have very limited employment rights.
How is employment status determined?
Courts consider the reality of the arrangement, looking at factors including personal service (whether the individual must do the work personally), control (how much the employer directs their work), and mutuality of obligation (whether there is an ongoing obligation to provide and perform work).