Legislation overview

An individual doing paid work in the UK falls into one of three main categories:

  • an employee, or
  • a ‘worker’ (which has a distinct legal meaning), or
  • self-employed (or independent contractor), or
  • entitled to various individual rights, for example under the Equality Act 2010 or the Agency Workers Regulations 2010, or
  • an employee shareholder with reduced employment rights.

Employee status is therefore significant because 'employers' will be exposed to the majority of employment rights only if the 'working person' can prove they are an employee rather than self-employed.

The definition of 'employee' and 'worker' differs slightly from one area of legislation to another, but generally workers have less rights than employees. However if rights apply to a 'worker' they usually also apply to an 'employee'. The basic employment rights for employees and workers are listed below (Where is there a complete list comparing employee and worker rights?).

Employees

A person is classed as an employee if they work under a ‘contract of employment’ which can be created in writing or verbally or by a mixture of both.

The definition of ‘employee’ contained in employment legislation is unhelpful. By way of example, section 230(1) of the Employment Rights Act 1996 defines an employee as ‘an individual who has entered into or works under (or, where employment has ceased, worked under) a contract of employment.’ The issue of employee status therefore has to be established on a case-by-case basis in accordance with the various tests which have evolved over the years – for example, the highly publicised 2016 case involving Uber drivers illustrates how important case law is in this area (see How do employers determine if an individual who already works for them is an employee?).

The majority of people in work are employees. A female digital marketing manager who has worked exclusively for a company for five years between 9am and 6pm at the company’s offices is likely to be an employee, even if she only works part-time for three days a week.

Only full employees can claim the following rights:

  • unfair dismissal
  • statutory redundancy payment
  • maternity and paternity leave and pay
  • parental leave
  • the right to request flexible working
  • rights under TUPE
  • rights to preferred payments in the event of the insolvency of the employer.

Some employees have reduced rights – for details of these, see the ‘employee shareholders’ information below.

Workers

Some rights apply to ‘employees’, other rights are given to ‘workers’.

A ‘worker’ is any 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, or whether oral or in writing, as long as the individual undertakes to do or perform personally work or services for another party that is not part of a client or customer relationship. This normally excludes those who are self-employed. (This definition is based on that contained in section 230(3) of the Employment Rights Act 1996, but the precise definition used varies from statute to statute).

Workers are entitled to some rights and protections. Agency workers and short-term casual workers are often likely to be ‘workers,’ unless they are found to be self-employed.

For example, a carpenter worked for a building company on several occasions over the course of a year. She was required to perform the work personally under the direction of the company, and was paid on a time basis rather than by reference to work performed. She is therefore likely to be a worker, but not an employee (see How do employers determine if an individual who already works for them is a ‘worker’?).

Examples of legislation applying to workers include:

  • Trade Union and Labour Relations Consolidation Act 1992, section 296
  • Employment Rights Act 1996, section 230(3)(b)
  • Working Time Regulations 1998 (SI 1998/1833), regulation 2
  • National Minimum Wage Act 1998, section 54(3)
  • Part-time Workers (Prevention of Less Favourable Treatment Regulations 2000 (SI 2000/1551), regulation 1
  • Employment Rights Act 1996, sections 43K and 230(6), inserted by the Public Interest Disclosure Act 1998, section 15.

Employee shareholders

Under this new scheme, some employees, known as 'employee shareholders', may exchange some of their UK employment rights for shares in the business they are working for. The status came into force on 1 September 2013 under the Growth and Infrastructure Act 2013. For further information, see What is employee owner or employee shareholder status?

Other rights

Temporary workers often experience difficulties with their employee status. Separate legislation covers the ‘temporary worker’ category – in particular the Agency Workers Regulations 2010 (SI 2010/93). For more information see our Temporary workers Q&As.

Individuals who suffer discrimination may be protected regardless of their status.

The government has acknowledged the general uncertainty among some employers about the differences between ‘workers’ and ‘employees.’ The differences are determined by what are known as ‘common law tests.’ For information on these tests, see How do employers determine if an individual who already works for them is an employee?

Is there a list of who are employees, who are workers and who are neither?

Is there a complete list comparing employee and worker rights?

Which type of employee qualifies for discrimination protection?

What rights do individuals who are not employees have?

Does supplying services through a one-person limited company ensure self-employed status, and what are the tax implications?

What are the main advantages and disadvantages of hiring employees compared to independent contractors?

If an employer uses agency workers do they accrue rights as employees against the employer or the agency?

If an employer engages a new ‘worker’ but labels them an ‘independent contractor,’ does that minimise or avoid employment rights?

How do employers determine if an individual who already works for them is an employee?

How do employers determine if an individual who already works for them is a worker?

Can a worker be an employee even if the employer has not agreed a salary with them?

What is employee shareholder status?

Which working relationships may give rise to difficulties concerning employee status?

What issues may arise for employers with employee shareholders?

Future developments

Explore our related content

Top