A working individual may be:
- 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 in the related Q&A Where is there a complete list comparing employee and worker rights?.
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 employment legislation does define 'employee', albeit in a very unhelpful way. The main example is the Employment Rights Act 1996 section 230(1) which 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 - see the related Q&A 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 9pm and 6 pm at the company’s offices is likely to be an employee, even if she only works part-time for three days a week.
By way of example, 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 and for details of these see the 'employee shareholders' information below.
Some legislation therefore relates to 'employees', other legislation uses the term '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 of the contract is express or implied, whether oral or in writing, as long as the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by that individual. 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 who worked for a building company on several occasions over the course of the year who 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 is likely to be a worker, but not an employee. (See the related Q&A How do employers determine if an individual who already works for them is a 'worker'?.
Examples of rights 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.
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 the related FAQ What is employee owner or employee shareholder status?.
One category of workers who experience difficulties with employee status is temporary workers. Separate legislation covers this category - particularly the Agency Workers Regulations 2010 (SI 2010/93). For more information see our Temporary workers Q&As.
In addition, individuals who suffer discrimination may be protected regardless of their status.
With the arrival of the employee shareholder legislation, the Government has acknowledged the general uncertainty amongst 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 the related FAQ How do employers determine if an individual who already works for them is an employee?.