Establishing your employment status
JobsAware defines the “UK Gig Economy” as the area of the Labour Market in the UK which does not involve permanently employed workers; including but not limited to temporary agency workers, self-employed contractors and those who work flexibly for an organisation which is not necessarily their employer. In this type of work, the employment rights you are entitled to depend on your 'employment status'.
On this page JobsAware aim to offer basic guidance on 'employment status' for those who work in the gig economy, as defined above.
What is my employment status?
Employment status describes the working relationship between someone providing work and someone doing the work.
If you are hired to work for someone, they have to meet certain responsibilities. One is that they must correctly work out your ‘employment status’ which is important for both tax law and employment law. They must do this separately for the two types of law, as they will not necessarily be the same.
Currently within the UK, there are considered to be three main employment statuses for employment law purposes: employee, 'worker' and self-employed. Furthermore, there are two statuses for tax law purposes: employee and self-employed. Individuals regarded by employment law as ‘workers’ may be either employed or self-employed for tax purposes depending on the circumstances.
Establishing your employment status is crucial for determining whether you should pay tax under PAYE and your eligibility for certain statutory rights (e.g. holiday pay, Statutory Redundancy Pay).
There is no single test to determine whether you are an employee, worker or self-employed - all the relevant factors need to be considered. It is also important to note that the employment status tests are often complex, circumstantial, and subject to continuous development through evolving case law.
It can therefore be difficult to understand what your employment status is.
Guidance in the basics of employment status and how you might be able to determine your rights, based on your employment status.
Whether someone is an employee for both tax and employment rights relies on whether 'a contract of service' exists. No further definition or clarity is provided so it is often determined by a number of factors, such as:
the requirement to provide personal service to the engager (that is, whether an engager would be happy if the worker sent someone into their place);
mutuality of obligation (the obligation for your engager to provide work, or to pay for work done, and the individual’s obligation to perform that work); and
a degree of control over the individual from the engager (including the right to control, even if that right is not exercised on a regular basis) for example whether a person is under a duty to obey orders, who has control over working hours, supervision, the mode of working, and who provides any equipment.
Other factors may also be taken into account as set out on the Low Incomes Tax Reform Group's website. Note that tribunals will usually take the same type of factors into account when deciding employment status for tax law or employment law purposes.
You need to carefully consider each of the factors and weigh up those pointing to employment against those pointing away from employment. Having done that, a picture will emerge from which a judgement can usually be made.
For employment law purposes, even if you don’t reach the 'pass mark' for employee status, you may have 'worker' status, which is broadly midway between self-employed and employed.
A ‘worker’ is basically someone who provides work or a service as part of someone else’s business, rather than their own. They must generally carry out the work personally, rather than being able to send someone in his or her place.
The term ‘worker’ can essentially be thought of someone who is not quite an ‘employee’ but is also not sufficiently independent of the engager to be genuinely self-employed.
People in non-permanent employment are not employees as companies tend not to exert sufficient control over the work and there is often a lack of mutuality of obligation between the parties – however they will often fall into this category.
Recruitment agency workers in particular will often be ‘workers’ for employment law purposes (but in addition, have certain additional rights conferred on them under the Agency Worker Regulations). We look at agency workers in more detail (including what difference working through an umbrella company or your own limited company makes) on our Agency Workers page.
Whilst there is no statutory definition of ‘self-employed’ status, it is generally taken to mean an individual who is engaged in business on their own account. This involves looking at things like whether the person performing the services provides his or her own (significant) equipment, whether the individual hires help, the degree of financial risk he or she takes and whether and how far he or she has an opportunity to profit from sound management in the performance of the task.
Tips for establishing Employment Status
Employment status is not a choice - a court will consider the reality of the working arrangements when determining employment status.
It is particularly important to note that the parties cannot necessarily rely on the paperwork or contract in place if the reality of the situation is different. Recently, when thinking about the contractual terms that might be in place, the courts have been more likely to consider the inequality in bargaining power and the limited ability of an individual to refuse to accept terms over which they have no control.
If you have more than one job, your status for each of them may be different.
A person’s employment status for tax law and employment law can be different – it is quite possible that a person could be self-employed for tax purposes but have 'worker' status for employment law purposes, for example.
Most platform workers are currently treated as self-employed for both tax and employment law purposes, however there have been a few cases according to which some platform workers were ‘workers’ rather than ‘self-employed’ for employment law purposes because the control that they were under by the platform meant they weren’t in business on their own account (e.g. in the Uber case, where the drivers had their route and fares set for them – for more information see here).
Problems with employment status
It is an engager's responsibility to get a worker's employment status correct for the purpose of operating PAYE if necessary and affording them the appropriate rights. Nonetheless, the cost to engagers in providing employment rights and the requirement to operate PAYE (including paying employer NIC) means that many engagers would prefer to treat their staff as self-employed when they are not, because it can save them money.
However, this is 'false self-employment' and is a very serious matter.
What are my rights?
What if I am unsure on my employment status, or I think I am being mistreated?
There is guidance on employment status on the GOV.UK and ACAS websites (ACAS is the Advisory, Conciliation and Arbitration Service and offers workers and employers free, impartial advice on workplace rights, rules and best practice).
You can check your employment status for tax purposes using HMRC's online service. This works by asking a series of questions, the answers of which should best match the usual working practices of the engagement. Please note that this tool should not be used to try and work out a status for employment law purposes – not least because it doesn’t cover 'worker' status.
Individuals can seek legal advice from a solicitor or employment law advisor if they are unsure on their employment status and/or believe that their employment rights have been breached. Many offer a free initial consultation.
Hopefully any issues you have can be resolved informally by talking with your engager, but if not, any disputes can be resolved by a court. For employment rights, a dispute is first heard at the employment tribunal - you can find more information on the gov.uk website.
For tax purposes, HMRC also carries out enforcement activity to ensure correct employment status tax determinations are being reached by engagers.
If you think your rights have been breached you should take steps to report this. If you are not sure where to report this, please contact JobsAware.