Understanding your Employment Status as a contractor
Working as a contractor offers a great deal of flexibility and independence. However, it also comes with a unique set of responsibilities and considerations. Understanding your employment status is crucial, as it determines your rights and obligations under employment law.
In this blog we take a look at the various categories of employment status that contractors may fall into, and what they mean for you.
Why does Employment Status matter?
Your employment status is important as it affects your legal rights under employment law, what you’re entitled to and what can be expected of you.
You might have something in writing from the organisation you work for to suggest what your employment status is. However, the way you work with them in practice ultimately determines your employment status for employment rights purposes.
It should be noted that employment status for tax purposes is not the same as employment status for employment rights purposes, although they are determined in a similar way. Employment status for tax is what IR35 is concerned with for example, but that’s a whole different area that we won’t go into here!
Employment Status Categories
When you are doing any kind of contract work in the UK, you are typically classified into one of three main employment categories:
You are likely to be classed as a worker if:
- You work on a casual basis, for example your work is not structured or regular
- You’re employed to do the work yourself
- You’re not offered regular or guaranteed hours
- You have little obligation to make yourself available for work, but should do work you’ve agreed to.
As a worker, you have some employment rights, including:
- National Minimum Wage (NMW) or National Living Wage (NLW)
- Paid holiday
- Protection against unlawful discrimination
You may also be entitled to Statutory Sick Pay (SSP), Maternity, Paternity and Adoption Pay, Shared Parental Pay and Parent Bereavement Pay. As a worker you are not entitled to sick leave, maternity or other types of parental leave, but you can take time off because you do not have to make yourself available for work.
Examples of workers in contracting:
- Casual workers
- Zero-hours contract workers
You are likely to be classed as an employee if:
- You’re required to work regularly unless you’re on leave
- You can expect work to be available consistently
- You can’t refuse to do the work
- You’re employed to do the work yourself
All employees are workers (but all workers are not employees). That is to say that employees have all the employment rights that workers do, but also have additional rights. These include:
- Maternity, Paternity and Adoption leave and pay
- Parental leave and pay
- Shared Parental leave and pay
- Parental Bereavement leave and pay
- Time off for dependants
- Time off for public duties
- Redundancy pay after 2 years’ continuous service
- Ability to claim unfair dismissal after 2 years’s continuous service
- Entitlement to the minimum notice period if dismissed or made redundant
- Entitlement to request flexible working requests after 26 weeks’ continuous service.
Examples of employees in contracting:
- Someone employed on a fixed term contract of employment directly with an end client
- A contractor employed directly by an agency
- An umbrella company employee
You’re likely to be classed as self-employed if you:
- are responsible for how and when you work
- are the owner of a company or are freelance
- invoice for your pay instead of being paid a wage
- are under a contract for services rather than a contract of service
- are able to send someone else to do the work for you if appropriate (substitution)
- are able to work for different clients and charge different fees.
If you are self-employed you do not have the same employment rights as employees or workers. However you do have some limited rights. For example, you are protected against discrimination in the workplace and to health & safety protection on a client’s premises.
Examples of self-employed people in contracting:
- Someone contracting in construction through the Construction Industry Scheme (CIS)
- A contractor providing their services through a Personal Services Company (PSC)
Be sure of your employment status
Employment status, and employment law in general, is a complex landscape but it’s important to learn how to navigate it. Now more than ever, the lines between employee, worker and freelancer can become blurred and it can be hard to know where you stand.
In summary, it’s a good idea to check that your work situation matches with one of the employment status categories we have talked about above, so you know your employment rights and entitlements. This includes looking at how any written agreements or contracts compare to the reality of your working relationships.
If you’re still not sure about your employment status, give us a call and we’ll be happy to talk through your situation.