Employment status: a guide to if you're an employee or self-employed

There are five main types of employment status, but knowing which box you fit into can be tricky. Here’s our complete guide to the different types, and how to work out what applies to you.

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Am I employed or self-employed?

It sounds simple enough, but when you’re faced with a form and a few boxes to tick, it can be hard to tell. Perhaps you have more than one job. Or you freelance, but it’s more as a long-term contractor for the same company than as a sole trader with a small business of your own.

Either way, whether you’re an employee or self-employed, this guide is designed to run through the five ‘main types of employment status’, according to gov.uk, and how to work out where you fit in. From there, you can also get more information on your rights and benefit entitlements, as well as your employer’s responsibilities, if you (technically) have one.

1. Employee

Gov.uk defines an employee as ‘someone who works under an employment contract’. However, this in itself is a bit vague, as contractors and other types of self-employed people may well have a contract with the client they’re carrying out work for.

The easiest way to work out whether you’re an employee is to answer the following questions. If the answer is ‘yes’ to most of them, you’re probably an employee:

• Are you required to work regularly (unless you’re on leave, including holiday, sick leave or maternity leave)?
• Are you required to do a minimum number of hours? And do you expect to be paid for the time worked?
• Is a manager or supervisor responsible for your workload, deadlines and giving direction around how work should be done?
• Is it just you who can perform the role? (So, you couldn’t send someone else to do your work instead)
• Does the business deduct tax and National Insurance (NI) contributions from your wages?
• Do you get paid holiday?
• Are you entitled to contractual or Statutory Sick Pay, and maternity or paternity pay?
• Can you join the business’s pension scheme?
• Do the business’s disciplinary and grievance procedures apply to you?
• Does your contract set out redundancy procedures?
• Does the business give you materials, tools and equipment for your work?
• Is this the only business you work for? If you have another job, is it completely different from your work for this business? (For example, you work as a receptionist but also run a pet grooming service at the weekend)
• Does your contract, statement of terms and conditions, or offer letter use terms like ‘employer’ or ‘employee’?

Things to check

You might be an employee, but have a different status with the business for tax purposes. If you’re unsure, ask your employer to run through this with you.

If your employment status was worked out incorrectly, you and your employer may have to pay outstanding tax and other penalties, or you may lose your entitlement to benefits. It’s worth checking everything’s in order.

2. Self-employed/contractor

Again, we’ll start with a gov.uk definition. You can pretty much tick that self-employed or contractor box if you run your business for yourself and ‘take responsibility for its success or failure’.

Still unsure? Other clues to look for are how you’re earning money for your work. If you’re self-employed, you won’t be paid through employee Pay As You Earn (PAYE). And you won’t be entitled to the rights and responsibilities that apply to employees.

To work out if you have self-employed status (or contractor status), ask yourself the following questions. If it’s a ‘yes’ to most of them, you probably do:

• Are you in business for yourself? If so, you’re responsible for its success or failure and can make a loss or profit.
• Are you free to decide what work you do? And when, where and how you do it?
• Could you subcontract the work, if you wanted to?
• If there was a problem with your work, would you be responsible for fixing it, in your own time?
• Do you and the employer agree a fixed price for your work, regardless of how long the job takes to finish?
• Do you use your own money or funding to buy what’s needed to run the business and deliver for the employer?
• Are you free to work for more than one client?
• Are you exempt from PAYE?
• Do you put in bids or give quotes to get work?
• Do you tend to supervise yourself when working?
• Do you submit invoices for the work you’ve done?
• Are you responsible for paying your own NI contributions and tax?
• Are you exempt from holiday or sick pay?
• Do you operate under a contract (often called a ‘contract of services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’ or ‘independent contractor’?

What’s the difference between 'contractor' and 'self-employed'?

A self-employed person is someone who works for themselves, not as an employee. From hairdresser to market stall trader, they provide services and products to clients and customers, usually for an agreed or advertised cost.

Contractors can also be self-employed, but they perform tasks on a contractual basis, rather than selling any products or rolling, bookable services. For example, a plumber would work for a client according to an agreed, one-off contract. You could repeat it, but as another contract. A market stall trader, on the other hand, isn’t contracted to sell you bananas.

A contractor can be self-employed, employed or a ‘worker’ (see below), depending on whether they work for an agency or not. And for contractors working in the construction industry, check out the Construction Industry Scheme (CIS), for details on your HMRC status.

Things to check

It’s possible to be employed and self-employed at the same time. Take the receptionist during the week, pet groomer on the weekend example above. If this sounds like you, make sure your daytime employer has your employment status filed correctly, and that you’re up to date with your responsibilities for the self-employed work you’re doing on the side.

Your employment rights, and how they’re different for you as a self-employed person, are another key consideration. Being your own boss means employment law doesn’t provide full cover, but your health and safety will still be protected, and sometimes your protection against discrimination. Check your client contracts and highlight what’s been agreed, so you’re fully informed.

Finally, if you’ve become self-employed, it’s very important that you let HMRC know. Any changes in your employment status should be flagged to HMRC, to double-check all your records are correct.

Worker

If you answer ‘yes’ to most of these, you’d probably be classed as a worker. Check your contract or ask your employer, if you’re not sure on any details:

• Do you have a contract or arrangement to do work for a ‘reward’ (see below)? This can be written or verbal.
• Is this reward for money or a benefit in kind? For example, promise of contract or future work, perks or a loan.
• Do you have a limited right to subcontract the work?
• Do you have to report for work, even if you don’t want to?
• Does your employer have to have work for you to do as long as the contract or arrangement lasts?
• You’re not doing the work as part of your own limited company (in an arrangement where the ‘employer’ is a customer/client.

If most of these applied to you, as a worker you’d be entitled to specific employment rights, such as statutory leave and National Minimum Wage protection. So it’s important to get clear about your status, and clarify with your employer if you think something’s not right.

Casual or irregular workers

This is a specific type of employment, and will usually apply if someone occasionally does work for a business, but that business doesn’t have any obligation to offer them work. The worker is also under no obligation to accept work. A contract like this will use words like ‘casual’, ‘zero hours’ or ‘as required’.

You’ll need to sign up to your employer’s terms and conditions to work, even if it’s only verbally, and you’ll be under some sort of supervision. Unlike some workers, you wouldn’t be able to subcontract this kind of casual work. However, the business should deduct tax and NI contributions from your pay, and provide the necessary tools or equipment.

4. Director

A company director may still have an employment contract – it depends on what sort of work you’re doing for that business.

Directors run limited companies, and have specific rights and responsibilities. For tax and NI contribution calculations, they’re classed as ‘office holders’.

If you’re a company director, you could still have an employment contract and specific rights. If you’re not sure what these are, seek legal advice or contact gov.uk to check, using the employment status tests information below.

5. Office holder

A bit more unusual, office holders are defined by gov.uk as people who’ve ‘been appointed to a position by a company or organisation but don’t have a contract or receive regular payment’. These can include company secretaries, club treasurers, trustees, clergy and many others. For more information check the office holder page on gov.uk.

It’s worth noting that although office holders are different to employees, self-employed people and workers, they may still have an employment contract.

Handy employment status tests

These are designed by gov.uk to check your status for tax purposes, and you can use them to do a quick employment status check. You can choose the phone or online option to get started.

For more information and an employment status definition

Acas are a great resource for employment status queries in England, Wales and Scotland. For Northern Ireland labour queries, check with the Labour Relations Agency.