Employment Status in Nottingham

Employment Status

What is Employment Status?

In UK employment law, there are three principal categories of employment status:

  • Employees working under a contract of employment, who have full employment rights.
  • The genuinely self-employed, who are independent contractors.
  • Workers, who have a status in between employment and self-employment.

But labels don’t determine employment status – that depends on the terms of the contract and how the arrangements operate in practice.

Organisations may have all three categories. For example, a chief operating officer, reporting to the chief executive, and fully integrated within the business, is likely to be an employee. A freelance designer, running their own business, and working for other clients, is likely to be self-employed. Sales representatives, receiving a retainer and commission, maybe workers.

There are also other types of status, such as partners, directors and members of limited liability partnerships (LLPs).

Why do people professionals need to know about employment status?

Typically, employment status issues occur when there is a dispute between an organisation and an individual working for it – otherwise, working relationships can continue for years without any certainty about employment status.

Modern working practices, such as zero-hours contracts, and the supply of labour via digital platforms, are bringing employment status under increasing scrutiny. Growth in the gig economy where payment is per job, and workers lack guaranteed hours and job security, has led to a stream of tribunal cases.

All organisations need to understand the difference between the employment rights of employees, the self-employed and workers.

Which status applies also has significant tax implications.

How do employment rights differ according to employment status?

Employees have the right to:

  • Protection against unfair dismissal.
  • A statutory redundancy payment after two years’ service.
  • Minimum statutory notice.
  • Statutory maternity, paternity, adoption, shared parental leave and pay, and statutory sick pay.
  • TUPE protection (provided TUPE applies to the transfer of undertakings concerned).
  • Request flexible working.
  • Paid time off for trade union duties and for ante-natal care, and unpaid time off to deal with emergencies for a dependant.

Both employees and workers are entitled to:

  • National Minimum Wage/National Living Wage.
  • A written statement of terms on the day the contract starts – workers, as well as employees, have this right from 6 April 2020.
  • An itemised payslip on or before the day payment is made – from 6 April 2020.
  • Working time rights, such as weekly and daily statutory rest breaks, and a 48-hour maximum working week (although they can choose to opt-out and work for longer).
  • A companion during a disciplinary or grievance hearing.
  • Protection from discrimination and from mistreatment following whistleblowing.
  • Protection from unlawful deduction from remuneration.
  • Health and safety protection.
  • Auto-enrolment on to a pension scheme.
  • Paid annual leave.

Self-employed contractors have no employment rights, apart from:

  • Health and safety protection.
  • Protection from discrimination (in some cases) and from mistreatment following whistleblowing.

How can Seagrave French help you?

How can Seagrave French help you?

“Getting employment status wrong is one of the most expensive tax mistakes”

The question as to whether someone is employed or self-employed is not as straightforward as it might at first appear. Many people assume they are free to choose, but this is not the case.

Although there is no clear-cut answer as to how you decide if you are self-employed or not, the following should be on your checklist

Fundamental factors to consider:

  • Control;
  • The right to get a substitute or helper to do the job;
  • Mutuality of obligations.
  • Other factors to consider:
  • Provision of equipment;
  • Financial Risk;
  • Basis of Payment
  • Opportunity to profit from sound management;
  • Part and parcel of the organisation;
    Right of dismissal;
  • Employee benefits;
  • Intention of the parties;
  • Length of engagement.

These are often matters of general employment law and not specific tax legislation. There is an enormous amount of Case Law in this area and HMRC are not always right. HMRC do not have the final say on whether somebody is self-employed or not. We can argue your case and take it before the Tax Commissioners for you.

The cost if you get it wrong is enormous. Not only is there the question of employees and employers national insurance, being classified as an employee also gives rise to all sorts of employment rights such as holiday pay, maternity pay, unfair dismissal etc. The decision has to be made by the employer and if you get it wrong it is going to be very hard to recover the back tax, interest, penalties etc from the worker.

We can review your existing arrangements and give you our opinion on whether it will stand up to attack from the Taxman. We can help advise on contracts for services to assist you and advise on how you can maximise your chances.

Contact Us

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0115 9415193

1 Poplars Court, Lenton Lane, Nottingham, NG7 2RR

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Seagrave French Chartered Accountants

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