It is important that individuals understand their employment status and that organisations understand the status of those working for them as this will determine the rights and responsibilities that each party owes the other in the working relationship. An individual can be an employee, a worker, a volunteer or self-employed. This will generally be determined by whether there is a contract in place between the individual and the organisation and if so the type of contract that is in place. A lack of clarity concerning the correct employment status of an individual can result in costly litigation to determine the correct status and consequent rights of the individual.
An employee is an individual who has entered into or works under a contract of service or a contract of employment. It is often easy to identify the employees in an organisation. However, the key features of an employment relationship are: that the employee performs the work personally for the organisation in return for a salary, that the organisation has a high level of control over the work that the employee undertakes, and that there are other factors in the relationship which are consistent with employment, such as equipment being provided by the employer or the employee being paid for absences. Employees benefit from the full range of employment rights. These rights include the right not to be unfairly dismissed if the individual has been employed for two or more years (unless the dismissal falls in to certain automatic unfair dismissal categories where two years’ service is not required) and the right to receive a statutory redundancy payment, which is again subject to the two year service requirement.
The worker category is wider. It includes employees but also includes those individuals who would not meet all of the requirements to be an employee. A worker is an individual who has entered into or works under a contract of employment or a contract where the individual undertakes to personally perform work or services for another party to the contract whose status is not that of a client or customer. Examples of workers who are not employees include casual (“as and when”) staff and agency workers. This category therefore excludes those who are genuinely self-employed. Workers have a number of the same rights as employees including the right to paid holiday, the right to receive the national living wage and national minimum wage and the right not to be subjected to discrimination. However, unlike employees, they do not benefit from unfair dismissal or redundancy rights.
A volunteer does not have any contractual relationship with the organisation that it volunteers for and is therefore distinct from employees and workers. A volunteer gives their time freely and without obligation. They do not receive any payment for their time, albeit that volunteers are often reimbursed out of pocket expenses. Because of the absence of any contract or legal obligations between the parties, volunteers do not benefit from the rights and protection which are afforded to employees and workers.
Self-employed individuals (often referred to as consultants, contractors and freelancers) contract with organisations to carry out tasks, either through their own company, or contracting personally. Although there is a contract in place, and it involves work being carried out, the relationship between the self-employed supplier and the end-user is that the end user is, effectively, a customer or a client.
While these categories may appear distinct, the employment status of an individual is not absolutely fixed and can change over time. The contractual relationship between the parties is a key factor but Employment Tribunals will always look beyond the contract to the reality of the relationship to decide the correct status in the particular circumstances. It is therefore important that organisations and individuals monitor how relationships develop and operate in practice to ensure that they are clear about the rights and obligations that may be in place.
This page was updated on the 1st August 2018.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of October 24, 2018.