3. Employee

An employee is someone who works under an employment contract.

A person may be an employee in employment law but have a different status for tax purposes. Employers must work out each worker’s status in both employment law and tax law.

Employment rights

All employees are workers, but an employee has extra employment rights and responsibilities that don’t apply to workers who aren’t employees.

These rights include all of the rights workers have and:

Some of these rights require a minimum length of continuous employment before an employee qualifies for them. An employment contract may state how long this qualification period is.

Working out employment status for an employee

Someone who works for a business is probably an employee if most of the following are true:

  • they’re required to work regularly unless they’re on leave, for example holiday, sick leave or maternity leave
  • they’re required to do a minimum number of hours and expect to be paid for time worked
  • a manager or supervisor is responsible for their workload, saying when a piece of work should be finished and how it should be done
  • they can’t send someone else to do their work
  • the business deducts tax and National Insurance contributions from their wages
  • they get paid holiday
  • they’re entitled to contractual or Statutory Sick Pay, and maternity or paternity pay
  • they can join the business’s pension scheme
  • the business’s disciplinary and grievance procedures apply to them
  • they work at the business’s premises or at an address specified by the business
  • their contract sets out redundancy procedures
  • the business provides the materials, tools and equipment for their work
  • they only work for the business or if they do have another job, it’s completely different from their work for the business
  • their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’

If most of these don’t apply, you should work out if the person is self-employed.

Individuals and their employers may have to pay unpaid tax and penalties, or lose entitlement to benefits, if their employment status is wrong.