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.
Once you’re finished, these articles might be handy too:
Download your free in-depth guide to figuring out your employment status. Get instant access to expert hints and tips in the click of a few buttons.
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.
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:
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.
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:
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.
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.
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:
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.
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.
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.
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.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
2 June 2017 • 1-minute read
Financial comparison site Moneyfacts has announced its annual rankings for UK business accounts, with Bank of Ireland, Barclays, and Metro…
9 April 2020 • 4-minute read
The new tax year started on 6 April. Here are seven self-employed tax changes you'll need to know about for 2020-21, including new self…
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2021 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.