Who Is Working For You?
You probably already have a mix of employed, self-employed and casual staff working for you, but are you clear about the differences in employment status, the importance of determining employment status and how this affects employment rights? With the unpredictable nature of the Event Industry, combined with seasonal peaks and troughs in work levels, it goes without saying that you need a flexible workforce which can be made up of any of these.
If you have staff working in your business, then you need to know the differences between a worker, employee and self-employed person.
Why Determining Employment Status is so Important
Determining employment status has become increasingly complicated over the years but it’s important that you get your head around the subject and your responsibilities when it comes to employing staff! To keep it simple, individuals need to understand their employment rights and employers need to understand their obligations to these individuals, as employment status underpins the whole employment relationship.
From the outset you need to assess the ‘real’ working relationship, so how the individual is going to work for you on a day to day basis or in practice. It then follows that you can determine the employment status of the individual and issue the necessary employment documentation (eg. contract of employment, contract for service etc).
Making sure the correct documentation is issued helps to clarify the employment status for both you and the individual and will hold you in good stead if there are any potential disputes to resolve, whether this is informally with the individual or a legal dispute.
Employment Status – In a Nutshell
In employment law, a person’s employment status helps determine their rights and their employer’s responsibilities. There are three main types of employment status for paid work in the UK (there are a couple more but we will focus on these three):
- Self employed
Employees have more rights than workers and so if a right applies to a worker then it also applies to an employee. The self employed have fewer rights.
Employment Status – Definitions
Employee – the legal definition of an employee is an ‘individual that works under a contract of employment and will carry out the work personally; without the right to provide a substitute’. A contract can be in writing or verbally and exists when terms such as pay, annual leave and working hours are agreed.
Most individuals are employees as they work a regular number of hours and get paid for the time worked. They may work full time or part time and cannot send someone else to do their work. The Company deducts tax and national Insurance from their wages.
Example job roles of an Employee – eg. a Admin Assistant working regular hours, either full time or part time.
Worker – the legal definition of a worker is ‘an individual who undertakes to do or perform personally any work or service for another party, whether under a contract of employment or any other contract. It does not matter if the contract is express or implied, verbal or in writing, provided the individual undertakes to perform the work or services personally, for an end-user who is not a client or customer.
A worker will occasionally do work for you. Your business doesn’t have to offer them work and they don’t have to accept it, they only work when they want to. (As a ‘worker’ can accept or reject work without penalty, this is what distinguishes them from an employee). They can’t send someone else to do their work. The Company deducts tax and National Insurance from their wages.
Example job roles of a Worker – these tend to be casual and seasonal workers. For example, a waiter/waitress that works for the company on several occasions over the course of a year and is required to perform the work personally under the direction of the company and is paid on a ‘time worked’ basis.
Self Employed – the legal definition is ‘a person that runs their business for themselves and takes responsibility for its success or failure’.
This type of person will bid for work to provide a service and will decide how, when and by whom the work will be delivered, submit invoices for work completed and be responsible for their own tax and national insurance. They are not paid through the Company’s PAYE. It’s important to note that a self-employed person cannot work exclusively for your business. Whilst there is no Contract of Employment in place, this is replaced by a Contract for Services – (available on the website for download)
A self-employed person still has protection for their health and safety on a client’s premises and against discrimination. They are not entitled to Statutory holiday or sick pay.
Example job roles of a Self-Employed Person – Wedding Planner, HR Consultant, Accountant, Photographer, Builder, Stationer
But does this all really matter?
In short, yes it does. As a business owner and ‘employer’ you need to know the implications and responsibilities that comes with taking on staff. These will vary depending on the path you choose to go down. So it is important to make sure you are fully aware of the employment status of the people working for you.
Confusion over employment status can create real problems with some individuals having thought to be workers or self-employed, actually prove to be employees. Which could have massive cost implication for you or leave you vulnerable to court claims. Just think of the recent high profile cases in the media with Uber for example. They argued that their drivers were self-employed, however the court found that they were in fact workers. This implications meant that they were entitled to Worker rights which includes paid holiday, National Minimum Wage and sick pay. The case is still on-going as they seek to take it to the Supreme Court, but it highlights just why it is so important to not only have a sound contract in place, but to also be mindful in how you manage the staff who work for you so as not to inadvertently increase their employment status and thus their rights and your responsibilities of this is not your intention.
If you are unsure of the status of the staff working in your business or the kind of staff that you need and the associated responsibilities, why not book in a 121 HR Hour call?
Have something to say? Why not join the discussion in my Facebook Group “People & Business.”