Employment Status

Employment status is significant because it affects what rights that person has, what responsibilities a company has towards them, and what the tax position is of that person.

How can we help?

At Thrive, we can assist if you are either a purported self-employed contractor who disputes  their status , or an employer in need of a full review of all contractor relationships.  We can provide a full advice which assesses all the factors which the Tribunal may consider.

Employment status is complicated.  Here at Thrive, we’ve assisted numerous companies in disputing the status of their contractors when they’ve tried to raise Employment Tribunal claims.

Employment Status

The following are the different statuses:

  • A worker is an individual who works under a contract where they agree “to do or perform personally any work or services for another party to the contract whose status is not … that of a client or customer”.
  • An employee is an individual employed under a contract of employment.

The difference between a worker and an employee is a blurred line, but generally it is accepted that workers are not an employee if they are free, without penalty, to accept or reject any offer of work made to them.

If someone doesn’t fall into either of the definitions above, then it is likely that they are self-employed.

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Why does it matter?

Employment status matters because it affects what rights each individual has. For example, self-employed individuals cannot bring claims before the Employment Tribunal, have no entitlement to a regular salary, maternity or paternity pay, sick pay, holiday pay, etc.

Perhaps most importantly for some people, status also matters because of tax implications. We’re not tax lawyers here at Thrive but, broadly, self-employed individuals are responsible for their own taxation, and are responsible for registering for VAT (if applicable), whilst employers must register employees for PAYE and National Insurance. IR35 is the tax legislation which allows HMRC to collect additional payment where a contractor (or self-employed person) is in fact an employee in all but name.

Factors Indicating Status

HMRC has a CEST tool which considers what status an individual might have from a HMRC perspective. However, HMRC and the Tribunal do not always have the same tests and considerations, and do not always come to the same conclusions. This means that, whilst HMRC might accept an individual’s tax status, there are some situations where a Tribunal may find that the individual was an employee or worker, affording them right to claim unfair dismissal/owed holiday pay/owed sick pay etc. These kinds of decisions would usually be made at a preliminary hearing at the Tribunal if there was a dispute about employment status.

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