In UK employment law, there are three principal categories of employment status:

• Employees working under a contract of employment, who have full employment rights.
• The genuinely self-employed, who are independent contractors.
• Workers, who have a separate status between employment and self-employment and have some, but not all, of the employment rights that employees have.

But labels don’t determine employment status – that depends on the terms of the contract, how the working arrangements operate in practice and whether the different legal tests are satisfied.

Organisations may have all three categories. For example, a chief operating officer, reporting to the chief executive, and fully integrated within the business, is likely to be an employee. A freelance designer, running their own business, and working for other clients, is likely to be self-employed. Sales representatives, receiving a retainer and commission, may be workers.

There are also other types of status, such as partners, directors and members of limited liability partnerships (LLPs).

Typically, employment status issues occur when there is a dispute between an organisation and an individual working for it – otherwise working relationships can continue for years without any certainty about employment status.

Modern working practices, such as zero-hours contracts, and the supply of labour via digital platforms, are bringing employment status under increasing scrutiny. Growth in the gig economy where payment is per job, and workers lack guaranteed hours and job security, has led to a stream of tribunal cases.

All organisations need to understand the difference between the employment rights of employees, the self-employed and workers.

Which status applies also has significant tax implications (see ‘Differences between tax and employment definitions’ below).

Employees have the right to:

• Protection against unfair dismissal.
• A statutory redundancy payment after two years’ service.
• Minimum statutory notice.
• Statutory maternity, paternity, adoption, and shared parental leave and pay, and statutory sick pay.
• TUPE protection (provided TUPE applies to the transfer of undertakings concerned).
• Request flexible working.
• Paid time off for trade union duties and for antenatal care, and unpaid time off to deal with emergencies for a dependant.

Both employees and workers are entitled to:

• National Minimum Wage/National Living Wage.
• A written statement of terms on the day the contract starts.
• An itemised pay slip on or before the day payment is made.
• Working time rights, such as weekly and daily statutory rest breaks, and a 48-hour maximum working week (although they can choose to opt out and work for longer).
• A companion during a disciplinary or grievance hearing.
• Protection from discrimination and from mistreatment following whistleblowing.
• Protection from unlawful deduction from remuneration.
• Health and safety protection.
• Auto enrolment on to a pension scheme.
• Paid annual leave.

Self-employed contractors have no employment rights, apart from:

• Health and safety protection.
• Protection from discrimination (in some cases) and from mistreatment following whistleblowing.

CIPD members can find out more in our Employment status Q&As.

The self-employed pay their own tax and national insurance. Businesses must deduct income tax and National Insurance (NI) contributions, and pay employers’ NI, for both employees and workers, through the PAYE system. But the legal tests for deducting tax and to determine employment status are not the same, so an individual may be taxed as an employee but not meet the employee test for employment rights.

Since April 2021, certain tax rules, known as the 'off-payroll working' rules or IR35, have applied to larger businesses. Where a contractor's services are supplied to a business through a separate service company, the rules require the service company to deduct tax and NI for that contractor if certain tests are met.

The ‘worker’ concept does not exist in tax law. It only applies to employment law and is a catch-all category. The principal statutory definition of a worker found in section 23 230(3) of the Employment Rights Act 1996 covers all employees but also provides those who would otherwise be self-employed, but who have some employee characteristics (such as having to perform work personally under a degree of control by the business), with meaningful legal rights.

Employees work under a ‘contract of service’; the self-employed work under a ‘contract for services’. Workers provide services personally to an organisation but under an arrangement that is looser than employment.

Courts and tribunals have largely determined the tests for deciding whether someone is an employee, a worker or self-employed. Factors indicating employment include an individual:

• having to perform the work personally.
• having to carry out the work when required (the organisation is also obliged to provide it - this is known as 'mutuality of obligation')
• being integrated within the business (for example, by being part of a team).
• being controlled by the organisation in the way the work is done.

Courts will also look at whether the nature, length, pay and benefits of the engagement are consistent with other employees in the organisation.

The dividing line between employment and self-employment can be blurred, but factors suggesting self-employment include individuals:

• actively marketing their work outside the organisation, being able to decide how and when it is done, and (possibly) providing a substitute to carry it out.
• not being integrated within the business, or subject to a high level of control.
• supplying their own equipment.
• accepting the risk of not being paid if the work is not done.
• submitting fee invoices for payment (rather than receiving fixed pay)
• having no obligation to accept work if it is offered.

Workers tend to have some of the characteristics of both, and the definition of a ‘worker’ has been further embellished by a number of gig-economy cases. Claims brought against organisations such as Uber, Pimlico Plumbers, Addison Lee and Deliveroo concerned whether the claimants were genuinely self-employed, or workers. Generally, these claimants could not be employees because they could choose to work when they wanted to, or work no hours at all.

Since the Supreme Court’s decision in Autoclenz Ltd v Belcher (2011), the courts are more willing to look beyond what the contract says (and the labels applied to each party) to how the relationship worked in practice.

A leading case on worker status is the Supreme Court decision in Uber BV v Aslam (2021). The Court held that the starting point is the law’s purpose of protecting vulnerable individuals who are under the control of an organisation. At all stages of the case, the courts looked beyond the documentation and found that Uber drivers were workers (despite the contracts saying the opposite) because the drivers’ services were tightly defined and controlled by Uber. 

Similarly, the Court of Appeal in Addison Lee Ltd v Lange (2021) held that minicab drivers were workers (rather than running their own taxi businesses) and that the contracts did not reflect the reality of the situation. That was also the case in Pimlico Plumbers Ltd v Smith (2018), in which the Supreme Court emphasised the importance of the reality of the working relationship regardless of contractual terms. The claimant in that case was not self-employed, as the company maintained, but a worker and, therefore, entitled to working time rights. A number of factors were relevant, including how much the claimant was integrated into Pimlico Plumbers’ business. 

However, the Employment Appeals Tribunal in Manning v Walker Crips Investment Management Ltd (2023) was unwilling to imply a term related to status into a worker's contract where the contract was perfectly coherent without it. There are also still cases where the legal test for worker status may not be met. In Johnson v Transopco UK Ltd (2022), the Employment Appeals Tribunal held that the company was actually a client of the taxi driver claimant’s own business, so he was not entitled to employment law protection. 

Further, in IWGB v CAC (2023) the Supreme Court accepted that Deliveroo riders were genuinely self-employed and not workers for the purposes of UK trade union rights. Various factors were relevant but a key focus at all stages of the case was the fact that riders did not have to complete a delivery personally and had a virtually unfettered right to substitute someone else in their place. There was no penalty if riders exercised this right or failed to make themselves sufficiently available, so the contract genuinely reflected the relationship between Deliveroo and its riders. 

These cases show that employment status will depend on the facts of each case and no one case is the same as another. However, recent decisions reflect a trend of employment tribunals and courts finding that individuals in the gig economy are workers rather than self-employed, even if that does not match the business model of the company.  For example, Uber failed in its argument that it was only a technology platform providing an app to connect customers to self-employed drivers. That did not reflect the nature of the working relationship. 

Several of the gig economy cases have been brought with the support of a trade union, because one of the rights that applies to workers is to be represented at work by a trade union. As such, Uber has now recognised the GMB trade union for its drivers, which means the drivers can choose to join the union and take part in collective bargaining. 

Organisations currently using a range of contracts, such as fixed-term, agency or zero-hours contracts, should consider whether these are still the right choice in terms of flexibility for the business and the need for stability by those working for them. It is good practice to ensure that all workers, or those on varying contracts, are aware of any vacant positions within the organisation, so they can apply for more stable contracts, if they so wish. This is a legal requirement for employees on fixed term contracts and agency workers.

Statements of written particulars are required for both employees and workers, setting out what rights they are entitled to. Employers’ legal obligation to provide an itemised pay slip for employees also now applies to workers.

Organisations may have inserted an opt-out clause in relation to maximum working time in their employment contracts, but they should remember this doesn't exempt employees or employers from their duty of care under health and safety legislation.

Since December 2022 the ban on exclusivity clauses in zero-hours contracts has been extended to the lowest paid workers. This means that if they decide to top up their income with extra work for other employers, they are protected from any detrimental treatment for doing so.  

Our Contracts of employment factsheet has more on contracts and written statements of particulars.

This area of law is likely to continue to change in the next few years, both as a result of the courts’ response to the new working practices typified by the gig economy, and new legislation.

Government reports and legislative developments

Good work: the Taylor review of modern working practices, published in July 2017, made 53 recommendations, including replacing worker status with the term ‘dependent contractor’ to distinguish them from the genuinely self-employed and employees.

The government response, published in February 2018, stated that all the Taylor recommendations, except one, would be accepted. Four consultations followed, dealing with employment status, increasing transparency in the labour market, agency workers, and the enforcement of employment rights.

The government’s Good work plan was produced in December 2018 and led to new regulations which now entitle all workers to the same written statement of particulars as employees as a right from day one of employment – the right to an itemised pay slip, and an extended reference period for calculating holiday pay for workers with variable hours.

In May 2022, a review into the Future of Work was announced by the government, to be carried out in two parts. The terms of the review included how flexibility in the gig economy can encourage productivity and growth, while also ensuring sufficient protections are in place to prevent exploitative practices. 

Subsequently, in July 2022, the government published its response to the 2018 consultation on employment status. While there was wide acknowledgement of the difficulties with the current employment status system, the response noted that there was little agreement on how best to address the concerns.

As such, the government confirmed that it will not be introducing new legislation in relation to employment status. Instead, the current three-tier framework for employment rights (employees, workers and the self-employed) will continue.  

However, three pieces of non-statutory guidance have been published:

• Employment status and employment rights: guidance for HR professionals, legal professionals and other groups
• Employment status and rights: support for individuals
• Employment status and rights: checklist for employers and other engagers

The government believes that existing case law and the new guidance will help provide clarity for employers on how to approach employment status questions.

Contacts

Acas – Checking your employment status 

GOV.UK - Employment status 

HMRC - online tool to check a person’s employment status for tax

Books and reports

Barnett, D. (2021) Employment status. (Employment Law Library 10). London: Nielsen.

Taylor, M. (2017) Good work: the Taylor review of modern working practices

Journal articles

Barnard, C. and Georgiou, D. (2023) Self-employment in UK law. Acta Universitatis Lodziensis Folia Iuridica. Vol 103, pp97-119.

Baska, M. (2019) Size of UK’s gig economy doubles in three years. People Management (online). 28 June.

Brown, J. (2021) Uber’s rollout of living wage will put ‘further pressure’ on other gig economy firms to follow suit, experts warn. People Management (online). 17 March.

Employment status in the 21st century. (2018) IDS Employment Law Brief. No 1090, April. pp11-18.

Georgiou, D. (2022) ‘Business Risk Assumption’ as a criterion for the determination of EU employment status: a critical evaluation. Industrial Law Journal. Vol 51, No 1, March, pp109-137.

Gevaert, J., De Moortel, D., Eiffe, F.F. and Vanroelen, C. (2023) Does employment status matter for job quality? A cross-national perspective. Work. Vol 75, No 2, pp.521-539.

Rosin, A. (2022) Towards a European employment status: the EU proposal for a directive on improving working conditions in platform work. Industrial Law Journal. Vol 51, No 2, June, pp478-493.

Middleton, J. (2018) What we know about employment status. People Management (online). 9 August.

Willmott, B. (2020) Is there a case to abolish ‘worker’ status? CIPD Voice. Issue 22, 3 February.

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.