Over the past few years employment status has become a hot topic, particularly in sectors such as the gig economy where some headline grabbing disputes have arisen involving household names such Deliveroo, Uber and Pimlico Plumbers.
But why does employment status matter and how can you identify someone’s employment status?
Why Employment Status Matters
Employment status will dictate the statutory rights an individual is entitled to under employment law. Unsurprisingly, employees have the greatest statutory rights, workers have some basic rights and protections and self-employed individuals generally fall outside the protection of statutory employment law rights.
Employees and workers share some basic rights including those regarding working time and minimum paid holidays, the right not to be discriminated against or harassed and the right to be paid the national minimum wage. However, employees are entitled to significant statutory rights that workers are not. These include the right not to be unfairly dismissed, rules regarding statutory minimum notice periods, family leave rights and statutory redundancy payments. When it comes to issues in the workplace, the ACAS Code of Practice on Disciplinary and Grievances applies to employees only.
If an employer misidentifies the employment status of an individual, they can inadvertently find themselves falling foul of the law. For example:
- If an employer considers someone to be self-employed and terminates their contract the employer could have an unfair dismissal claim on their hands, if in reality that person is an employee.
- If an organisation considers someone to be self-employed and doesn’t pay them for holiday the employer could face a claim for unpaid holiday, if in reality that person is a worker or an employee. In Pimlico Plumbers and Anor v Smith, the Supreme Court found that a plumber was a worker during the period he worked for his former employer and that he was not genuinely self-employed. This was despite signing an agreement describing himself as self-employed and paying tax on that basis. He was therefore entitled to holiday pay and other basic workers’ rights.
Identifying Employment Status
When it comes to identifying someone’s employment status, it’s important to have an awareness of how these are defined for employment law purposes:
- Employees
An employee is an individual who has entered into or works under a contract of employment. A contract of employment is a contract of service or apprenticeship. A contract of employment can be expressly agreed (either orally or in writing) or be implied by the nature of the relationship between the parties.
- Workers
Workers are individuals who work under a contract of employment, or any other contract whereby the individual undertakes to do or perform personally any work or services for the other party to the contract where the other party to the contract is not a client or customer.
- Self – Employed
Self-employed individuals are those who are in business on their own account and who provide professional and other services to their clients or customers.
For some employers, the announcement of the change to the tax rules for engaging individuals through personal service companies (which will come into force on 6th April 2020) may have caused confusion regarding employment status. However, it’s important to bear in mind that these changes are for tax law purposes. You should seek specialist tax advice on this where necessary.
When it comes to determining employment status for employment law purposes, tribunals will consider a number of factors. These include:
- Whether the individual is required to provide personal service
- Whether the ‘employer’ is obliged to provide work and the individual is obliged to accept it
- The degree of control the ‘employer’ has over such things as deciding what work will be done, the way in which it shall be done, how it will be done and when and where it shall be done
- Whether the individual is integrated into the organisation
- The degree of financial risk the individual has
- Who provides the main tools and equipment
- Whether the individual is paid when absent e.g. holiday pay, sick pay
- Whether the individual provides services to others or works exclusively for one ‘employer’
In some cases, identifying employment status can be tricky, particularly as employment tribunals will look at the circumstances of each individual case meaning that outcomes can sometime be unpredictable. If you are unsure of the employment status of an individual in your organisation it’s important to seek advice on your situation.
Looking Ahead
When considering the rights of employees and workers it’s important to be aware that there is a change on the horizon. From 6th April 2020 all employees and workers will have the right to a written statement of terms on or before the first day of employment. Currently the obligation is for employers to provide this to employees only and to do so within two months of employment starting.
If you have any employment law matters with which you would like assistance, please do not hesitate to contact us as we are happy to help.