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The employment status of an individual will affect their rights as an employee and the responsibilities an employer has.

Most people will be entitled to rights like the National Minimum Wage or paid sick leave and holidays. Someone who is self employed will not receive these benefits, although there are some advantages – especially in the case of a limited company. Deciding whether a person is employed or self employed can be complex, but there are indications set out by HMRC to make that decision and a tribunal or court will have the final say. Employment status is also used to deduct the right amount of tax and national insurance.

Status is based on facts and isn’t something that can be decided by either yourself or an employer. There are some facts that have to be considered before a status can be legally declared. A person may be an employee, a worker or self employed; a worker is different to an employee, as they are unlikely to be working under a contract, perhaps an agency worker or a casual worker.

Are you self employed?

If you work when and where you like and choose the jobs that you do, you are likely to be self employed. As an individual of this status, you are likely to only be paid for the work you complete to a satisfactory standard and you won’t receive any pay for time off, either sick pay or holiday pay. You will also be expected to provide all your own tools for the job you are carrying out, although you will be free to hire someone else to do the job for you.

Are you employed?

If you are expected to attend a place of work on set days each week and work a certain number of hours each day, you are very likely to be employed. As an employed person, you will work for someone else and be told what work to do and when. Your pay will be a set amount, although you may receive bonuses. An employee will be paid for overtime too, unless they work flexible working hours.

What if you get employment status wrong?

If an employer fails to correctly identify an employee, they could be liable for the income tax and national insurance which should have been deducted from pay. In addition, not complying with the PAYE regulations could lead to prosecuted by HMRC. It is advisable to contact a professional if you are unsure of employment status.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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