Employment status
The employment status of an individual is important for a business to clarify, as different legal rights apply to employees, workers and those classified as self-employed. It is, however, increasingly common for problems to occur when there is a discrepancy between the way an individual’s employment status is defined on paper and how it is managed on a day-to-day basis.
If an individual’s employment status is incorrectly identified it could give rise to claims for backdated pay and benefits, resulting in a significant financial penalty for employers if the claims are successful.
Similarly, HMRC are looking increasingly closely at how contractors are engaged, in reality, to determine whether their self-employed status is genuine. This means it is important for employers to engage staff on the correct basis to avoid fines and penalties, which could put their business at risk.
In order to minimise any potential risks and financial uncertainty, it’s important for businesses to review their staffing structures, individual status and terms and conditions of employment.
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How Loch Law can help
Our employment lawyers can work with you to identify the right status for your staff to support your business goals and prevent the risk of future disputes, expensive back-pay claims, tax related issues and more. Loch Law can ensure that all roles are correctly defined, and you have the right personnel and contracts in place.
We can also regularly review the employment status of individuals on a case by case basis, ensuring the appropriate classification is updated as roles and working relationships evolve.
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What is employee status?
An employee is an individual who has entered into or works (or worked) under the terms of a contract of employment. The contract can be expressly agreed (in writing or orally) or implied by the nature of the working relationship. To have employee status:
- An individual must be obliged to perform work personally (rather than being able to send a substitute).
- The employer needs to be obliged to provide work and the employee needs to be obliged to accept work.
- The employer needs to have some control over the way the employee carries out work.
In order to bring a claim of unfair dismissal, an individual must be an employee. There is no single test to be applied by the Tribunal to determine whether a person is an employee or not. The Tribunal will consider the true legal relationship between the parties, taking all of the relevant factors into account.
What is worker status?
The concept of worker status was introduced by statute, and is sometimes seen as a “half-way house” between employee and self-employed status. Workers are entitled to fewer statutory rights than employees, but do have some key legal rights, including:
- Protection from discrimination.
- Entitlement to the statutory minimum level of paid holiday.
- Protection against unlawful deduction from wages.
- Entitlement to the national minimum wage.
What is self-employed status?
The self-employed enjoy no statutory employment rights (although they may be protected by discrimination law).
