Guidance

Employment status and employment rights: guidance for HR professionals, legal professionals and other groups

Published 26 July 2022

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Section 1: Guidance overview

Employment status affects everyone who works. Areas such as pay, leave and working conditions can all depend on employment status.

People with different employment statuses have different rights set out in law. The rights are designed to protect individuals. Most of the rights are compulsory, and normally can’t be signed away.

Clarity around individuals’ and employers’ (or engagers - a person or business who engages self-employed individuals for work) rights and responsibilities at work supports empowerment for working people and certainty between competing businesses.

There are 2 separate pieces of guidance tailored for:

  • individuals to help them understand their employment status so that they know their rights, can have informed discussions with their employer about them, and can take steps to claim them and have them enforced where necessary
  • employers or engagers to help them understand individuals’ employment status so they comply with the law, helping ensure individuals receive the rights they are entitled to, and to avoid unnecessary disputes and associated costs

This detailed guidance aims to help HR professionals, legal professionals and other groups to advise employers, engagers and individuals about the law and how to comply with it.

The purpose of this guidance is to bring additional clarity to employment status. Clarity around individuals’ and employers’ employment rights and responsibilities at work is an important part of a well-functioning and fair labour market.

Using this guidance

The territorial scope of this guidance is Great Britain (England, Scotland and Wales) as employment law is devolved in Northern Ireland.

For Northern Ireland guidance, please visit:

Courts and employment tribunals decide employment status based on the law, and the case law for employment status constantly evolves as new cases and appeals are heard and new precedents are set. This guidance will continue to be updated to reflect future, significant changes in the law.

This guidance does not impose any legal obligations. It does not change the law. Only a Court or employment tribunal can make a final decision on employment status for employment rights purposes. This guidance does not and cannot provide definitive answers to individual queries. It is not intended to be relied upon as a substitute for seeking advice on specific circumstances, as each employment relationship will be very fact specific.

For specific queries, individuals or employers may wish to seek advice from Acas. While Acas cannot provide a determination of employment status in specific cases, they can explain relevant law and provide free, impartial, and confidential advice on your options. The Acas website is at: www.acas.org.uk and the Acas helpline number is 0300 123 1100, open Monday to Friday, 8am to 6pm.

This guidance does not apply to tax status as there is a separate employment status system for tax, which determines an individual’s tax status. In tax, there are 2 categories of employment status; employed and self-employed, whereas employment status for employment rights also has a ‘worker’ status in between the self-employed and employed statuses. This means the systems are not interchangeable, and so a determination of employment status for employment rights will not necessarily apply for tax.

Section 2: Introduction to employment status

What is employment status?

Employment status is relevant in all working relationships, it defines the minimum rights and responsibilities for individuals and employers or engagers in the workplace, covering areas such as pay, leave and working conditions (see Table 1: Employment rights eligibility for more details about statutory employment rights). These protections have been set out or developed in law to ensure individuals are protected from unfair practices.

Employment status is not just a matter of what a contract (whether oral or in writing) states; it is determined by the reality of the working relationship between employer and individual, taking account of all the circumstances including the purpose of employment legislation. The written contract is just one part of that assessment.

Although there are countless different working relationships that individuals and businesses can agree to, the law reduces these into one of three main types of status for employment rights. However, there are special provisions for other groups of workers such as agency workers, see section 4 for further details. The 3 main types of employment status are:

  • an employee who has the most rights and responsibilities
  • a worker – sometimes referred to as ‘limb (b) workers’ who have fewer rights and obligations. The aim of the limb (b) worker status is to extend the coverage of certain employment rights to a wider group of individuals than just employees, protecting a larger number of individuals who are in dependent working relationships but are not employees.
  • a self-employed person who has the least protection but also tends to have fewer personal obligations and have significant flexibility in their work and/or delivers a service to a customer or client as part of a business or professional undertaking

The following is a more detailed description of each status:

Employees

This status reflects greater certainty over where, when and how work is carried out. The individual would likely work regularly and be paid for completing those hours of work. Employees tend to be individuals in permanent full-time or part-time work but can also, in some circumstances, include individuals on casual contracts (such as fixed term and/or zero hours (see Section 6)). Employees are generally entitled to the full suite of employment rights – the relevant statutory rights are explained in the Employment rights section, subject to qualifying periods. However, there is also discretion for employers to provide additional contractual benefits to employees. For example, an employer could provide paternity leave of 2 months which is well above the statutory entitlement of 2 weeks paternity leave.

Employees also benefit from and are bound by other common law rights and obligations. Both statutory and common law rights and obligations (body of law formed by the decisions from Courts and tribunals) are implied into a contract of employment and cannot be overridden by the terms of the employment contract. For example, notice periods, even if contractually agreed, are subject to a statutory minimum.

Compared to other employment statuses, there are more obligations between an employer and an employee. For example, employers have the right to be informed by a certain point if one of their employees is intending to take maternity/paternity/adoption leave or return to their job after the leave has been taken. While employers in most cases have the obligation to provide work and remunerate accordingly.

Workers (limb (b) workers)

Individuals in this category are less likely to be working in permanent, full-time employment with a single employing organisation. They are more likely to have more casual and flexible working relationships often involving multiple and sometimes rival employers. Limb (b) workers are entitled to core statutory employment rights but have increased freedom in how much, where and when they work. All limb (b) worker rights are rights from day 1, where limb (b) workers do not need continuous service or qualifying periods to accrue their rights reflecting their more flexible relationship to their employer(s). However, as with the employee status, there is also discretion for employers to provide additional contractual statutory benefits beyond the legal minimum to limb (b) workers, for example, paying above the National Minimum Wage or National Living Wage.

The limb (b) worker and employer(s) relationship should expect to have more flexibility over how, where and when work is done compared to the employee status but limb (b) workers are generally required to do the work themselves and only have a limited right to send someone else. This status still requires employers to provide individuals with a core set of employment protections. Many individuals enjoy the increased freedom that this status can provide in their work including balancing their work with other commitments whilst still benefiting from core protections.

Self-employed

Self-employed individuals should expect to have the most flexibility and control over how, if and when they work and are generally able to send someone else to do the work without significant restrictions. It is a category for those who run and manage their own business or work, often best understood as individuals in business for themselves. Generally, self-employed individuals have no statutory employment rights but are entitled to some health and safety protections/obligations as well as anti-discrimination rights when they are contracted by a customer or client.

For an employer or engager, it is important to understand that the status of an individual they employ or engage is not simply a matter of choice. The status is determined by the real nature of the working relationship, not what an employer or engager chooses to call it. Therefore, simply calling someone ‘self-employed’, or putting that term in writing in a contract, does not necessarily mean that the individual will legally be classed as self-employed. If the relationship in reality is that of a limb (b) worker or employee, then the individual is entitled to limb (b) worker or employee rights regardless of what it says in their contract. Deliberate misclassification of employment status should not be used to deny employees or workers employment rights and protections they are entitled to. If you need advice on the employment status of individuals you employ or engage, or who you intend to employee or engage, see the checklist for employers.

Employment rights

Employment rights and protections are set out by law and employers must not avoid them. Employment rights and protections vary between the different statuses, and some have qualifying periods.

There are some statutory rights which an employee gets after working continuously for a period of time – this is called continuity of service. Establishing sufficient continuity of service is essential to access those employee rights that have a qualifying period such as the right not to be unfairly dismissed and the right to a statutory redundancy payment. Even if a person does not work every week, a Court can sometimes find that their relationship with their employer continues so that there is an umbrella contract or over-arching contract covering a particular period of time which means there is continuity of service. There are some detailed parts of the law that may mean continuous service is maintained, for example if there has been a temporary cessation of work. See continuous employment for further information.

Table 1: Employment rights eligibility

A. Worker / employee rights

Statutory right / protection Employee Limb (b) worker Qualifying period
Unlawful deductions from wages Yes Yes Day 1
National Minimum Wage/National Living Wage Yes Yes Day 1
Paid holidays Yes Yes Day 1
Right to be accompanied at a grievance/disciplinary hearing Yes Yes Day 1
Whistleblowing Yes Yes Day 1
Discrimination, other prohibited conduct under the Equality Act 2010 and reasonable adjustments* Yes Yes Day 1
Equal treatment for part-time workers Yes Yes Day 1
Protection from detriment for trade union membership* Yes Yes Day 1
Itemised pay slip Yes Yes Day 1
Written particulars of employment Yes Yes Day 1
Protection from detriment in certain health and safety cases Yes Yes Day 1
Workplace pension scheme* Yes Yes Day 1
Right to join a trade union and to participate in trade union activities* Yes Yes Day 1

B. Employee rights day 1

Statutory right / protection Employee Limb (b) worker Qualifying period
Maternity leave and adoption leave Yes No Day 1
Statutory bereavement leave Yes No Day 1
Time off various activities and duties (paid and unpaid) Yes No Day 1
Equal treatment for fixed-term contract staff Yes No Day 1
Unfair dismissal (for certain automatically unfair reasons) Yes No Day 1
Breach of contract Yes No Day 1
Statutory Sick Pay* Yes may be entitled Day 1

C. Employee rights with qualifying period

Statutory right / protection Employee Limb (b) worker Qualifying period
Minimum period of statutory notice Yes No 1 Month
Medical suspension pay Yes No 1 Month
Guaranteed pay Yes No 1 Month
Shared parental leave and Paternity leave Yes No 26 Weeks
Right to request flexible working Yes No 26 Weeks
Right to request time off for study or training Yes No 26 Weeks
Adoption pay, Shared Parental pay, Paternity pay, Maternity pay and Parental Bereavement pay* Yes may be entitled 26 Weeks
Unpaid parental leave Yes No 1 Year
Unfair dismissal (ordinary) Yes No 2 Years
Written reasons for dismissal (in most cases) Yes No 2 Years
Statutory redundancy pay Yes No 2 Years

*Further information on employment rights and statutory payments that have similar, but different eligibility criteria is available in the next sections.

Discrimination, other prohibited conduct under the Equality Act 2010 and reasonable adjustments

The Equality Act 2010 protects those in “employment” (which for this purpose comprise employees, limb (b) workers and some self-employed people) from unlawful conduct such as discrimination, harassment and victimisation that applies to protected characteristics. The protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. The Equality Act applies to individuals who have an employment contract, an apprenticeship contract, or a contract to personally do work. The Equality Act employment protections also extend to a variety of wider work relationships beyond employment, such as job applicants and former employees, contract workers, police officers, partners, barristers and advocates, public office holders and those seeking or undertaking vocational training. Protections do not extend to volunteers. Read more about discrimination and your rights.

Individuals who are covered by the Equality Act 2010 and are subject to discrimination or any other unlawful conduct can make a claim in an employment tribunal.

Workplace pension scheme

An employer must automatically enrol employees and limb (b) workers into a workplace pension scheme and make contributions to their pension if all of the following apply: you are aged between 22 and State Pension age, you earn at least £10,000 per year for that employer and you usually (‘ordinarily’) work in the UK. Read more about joining a workplace pension.

Right to join a trade union and to participate in trade union activities

It is automatically unfair for an employer to dismiss an employee on the grounds of trade union membership or for participating in union activities at an appropriate time. It is also against the law to refuse to recruit a person as a limb (b) worker or employee because the person is a member of a trade union. Employers must not subject a limb (b) worker or employee to detriment for the purposes of preventing, deterring or penalising trade union membership or participation in union activities at an appropriate time. Read more about joining a trade union.

Statutory payments

All employees (and in limited cases some limb (b) workers) are eligible for Statutory Maternity Pay, Shared Parental Pay, Paternity Pay, Adoption Pay, Parental Bereavement Pay and Statutory Sick Pay as long as they also meet other qualifying criteria and earn on average above the Lower Earnings Limit (£123 a week before tax).

Whether an individual can get these rights is determined by reference to criteria set out under the Social Security Contributions and Benefits Act 1992 and by reference to other relevant legislation. Whether a potential employer is an employer for Statutory Maternity Pay, Shared Parental Pay, Paternity Pay, Adoption Pay, Parental Bereavement Pay or Statutory Sick Pay purposes is linked to their obligation to pay secondary Class 1 National Insurance Contributions, rather than the employment rights framework.

Other employment frameworks and entitlements

The employment status framework for tax and National Insurance is separate to the employment rights framework and comprises two categories: employee and self-employed. Whether an individual is classed as an employee or self-employed for tax purposes affects the tax and National Insurance they pay and how they pay them, and the individual’s entitlement to some social security benefits. Employment status for tax is a matter of fact (as it is for employment rights and protections) and is not a choice for the individual or their engager. This means that the facts and circumstances of the engagement determine what employment status an individual has, rather than a decision by themselves or their engager to assign them a specific employment status, or belief that they have a particular status. In the majority of circumstances, employment status for tax purposes is clear and simple to establish, but in situations where it is more complex, HMRC has detailed guidance for individuals and employers. Tax and National Insurance legislation also requires that some engagements are treated as employment for tax purposes where there is not a contract of employment between the individual and the recipient of their services. This includes office holders, such as company directors, and, where certain conditions are met, workers supplied by agencies or working through Personal Service Companies. You can use HMRC’s free online Check employment status for tax (CEST) tool to find out if an individual should be classed as employed or self-employed for tax purposes.

The employment status framework for Universal Credit is also separate to the employment rights framework and generally follows the definitions for tax and National Insurance, comprising two categories: employee and self-employed. The main difference between Universal Credit and the treatment of tax and National Insurance is that where a claimant operates through a company in a position comparable to a sole trader or, one of a small number of partners (i.e. they are the sole owner of the company or one of a small number of shareholders) they are treated as self-employed in the same way as someone trading without a company structure. Find out more about Universal credit for self-employed claimants.

Maternity Allowance is a benefit intended for those who cannot get Statutory Maternity Pay, such as the low paid and the self-employed. Entitlement to Maternity Allowance is dependent on satisfying qualifying conditions. For self-employed women this involves being registered as self-employed with HMRC according to their rules for at least 26 weeks in the 66 weeks immediately preceding the expected week of birth. The amount of Maternity Allowance received by self-employed women is dependent upon the number of class 2 National Insurance contributions paid for those same 66 weeks. Self-employed women who have paid 13 weeks of Class 2 National Insurance contributions in the 66-week period are treated as having sufficient earnings to entitle them to the standard rate. Find out more about Maternity allowance.

Section 3: Key factors in determining employment status

Employment status will be mainly governed by the reality of the relationship between the individual and the organisation. The absence of a written contract or the fact that a contract between the 2 may specify a particular status is not conclusive if that does not correspond to what happens in reality.

The Employment Rights Act 1996 sets out most of the employment rights and protections in Great Britain. In the Employment Rights Act 1996, Section 230, both employee and worker are defined in the legislation. An employee also comes under part (a) of the definition of worker and is sometimes referred to as ‘limb (a)’, as they work under a contract of employment. Contract of employment means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing. Part (b) of the worker definition, ‘a limb (b) worker’ covers a person who works under any other contract whereby the individual undertakes the work or performs services personally and the other party to the contract is not a client or customer of any profession or business carried on by the individual.

Based on the legislation and case law, it is easiest to consider for the purposes of employment law that there are 3 employment statuses in Great Britain:

1. Employee: where it can be determined that a contract of employment exists. Employees are entitled to all employment rights subject, where appropriate, to qualifying periods and sometimes other qualifying criteria.

2. Limb (b) worker: where it can be determined that any other contract by which the individual performs work or services personally for someone else (unless the individual is working on a genuinely self-employed basis for a client or customer) exists. Limb (b) workers are entitled to core day 1 statutory employment rights.

3. Self-employed – not defined in the legislation but best understood as people who carry on a profession or business on their own account and enter into contracts with clients or customers to provide work or services for them and/or are not obliged to do the work they contract to personally.

The Courts have considered many different cases and there are a number of principles to be applied. This guidance helps to set those principles out. This has ensured the legislation’s intention is upheld whilst maintaining the flexibility of the Courts to adapt to modern working practices.

Many of the same factors will be considered when determining if someone is an employee or a limb (b) worker, but with a higher threshold for an employee. The weighting of each factor will vary depending on the relationship in question and is a judgement based on the whole picture of the individual case. This allows the Courts to assess the reality of the relationship between the individual and the employer. The Courts will also consider Parliament’s intention in enacting employment legislation - namely to protect those who are dependent on an employer for their livelihood.

Employee status

Over time the Courts have developed a range of tests to identify whether an individual is an employee. The following requirements must be satisfied in order for an individual to be an employee:

  • personal service – the employee has to do the work themselves (there may be a limited right to send someone else). For example, an employee on a 9-5pm contract, who is expected to turn up every day and carry out work for their employer would satisfy this test. On the other hand, if the individual can send anyone else in their place (with no restrictions) that will not be personal service and the individual will not be an employee. However, even if there is a contractual right to provide a substitute but the parties have no intention of relying on it and/or it does not reflect how the agreement works in practice, this does not prevent personal service from being established
  • control – the employer is in control of the employee. Control is best understood as how much freedom the individual has to decide for themselves over how, where, and when the work is done. Factors to consider can include who gives out the work, who specifies how, where and when it is to be done, who sets the rate of pay for each assignment, who provides the equipment, or whether the individual has to wear a uniform or specific branding. Day to day control of work is not a requirement, but the employer must have ultimate control by retaining a right to give instructions and for the employee to follow them (provided they were reasonable) or be at risk of disciplinary actions up to and including dismissal
  • mutuality of obligation – is a special kind of two-way responsibility – this will be present during any period when the employer must provide work and the employee must do the work provided. An individual is not an employee during periods when they are not working if there is no commitment to accept further work which may be offered

Limb (b) worker status

The following requirements must be satisfied in order for an individual to be a limb (b) worker:

  • any contract (not a contract of employment) whereby an individual undertakes to perform work or services for the other party. A contract may be oral or in writing but in order for there to be a contract there must be an exchange of consideration, for example, each party must provide something of value to the other party such as the work or service being exchanged for wages
  • personal service – mirrors the test for employee, that is, does the worker have to carry out the work themselves. Furthermore, a person may still be a limb (b) worker if they have a limited or occasional right to provide a substitute. On the other hand, an unlimited and unrestricted right to substitution that is exercised for this test would strengthen arguments for the self-employed status
  • is the person working as part of their own professional or business undertaking and the other party to the contract is a client or customer? The nature of the contract must be that the relationship between the parties is not between an independent business and an independent client/customer as that would imply the individual is self-employed. Factors that may be relevant are the degree of control exercised by the employer. This might include, whether the way in which the service is provided is very tightly defined and controlled by the employer, whether the individual provides the service in their own name or the name of the business the individual is working for, who benefits from customer loyalty and goodwill generated by the provision of the service, who sets the rate of pay, who does the client pay, what financial risk does the individual take, the exclusivity of the engagement (does the individual work with other clients/customers) and its typical duration, what equipment the worker supplies and/or the level of risk undertaken by the worker.

Ultimately, Parliament’s intention in enacting employment legislation recognised that employees and limb (b) workers were in a vulnerable position with their employers and required statutory protection. The greater the degree of control exercised by the employer over the work or services performed by the individual concerned the more likely the person is to be an employee or a limb (b) worker.

Other factors that may be relevant to employees, limb (b) workers and the self-employed

Terms and conditions of the contract

Employment status is not just a matter of what the contract (whether oral or in writing) states or the type of contract you are on (for example permanent, zero-hours, casual or agency); it is determined by the reality of the working relationship between the employer and the individual. It takes account of all the circumstances including the purpose of employment legislation, of which the written contract (if there is one) is just one aspect.

Even if an employer attempts to create a different employment status through the terms of the contract, if this does not reflect the reality of the agreement, this does not change the legal employment status of the individual which depends solely on the true reality of the relationship. Any terms which aim to exclude/limit employment rights of individual(s) by seeking to avoid employee or limb (b) worker status are of no effect and will be disregarded by the Courts.

Example

An individual enters a contract with their employer to perform work where they are described as ‘self-employed’. This contract may have a clause which removes one of the key principles for satisfying the employee status e.g. a clause providing that the employer does not have to offer any work and then individual does not have to accept any work (a mutuality of obligation clause). If this does not reflect the reality of the relationship and there is in fact mutuality of obligation, then the individual may well be an employee even though the contract stated the individual was self-employed.

Financial risk

In general terms, the greater the financial risk (for example, purchasing assets to use or only being paid if the work is successfully completed) the more likely that this will be consistent with self-employment. However, the absence of financial risk doesn’t automatically mean the person is an employee or a limb (b) worker.

Example

An individual pays to undertake their own professional accounting qualifications with the ambition of operating their own accountancy firm, collecting payment for work completed for different clients. In this circumstance, as the individual paid for their own exams in order to train and practice accountancy (rather than it being paid for by the employer) the individual undertook some financial risk. This factor could be used to strengthen arguments to self-employment, if other factors were also consistent with this employment status.

Integral to the organisation

In certain circumstances, integration to the organisation can be a factor consistent with employee or limb (b) worker status. Examples of this can include that the individuals assist other members of a team, are part of a management structure or are subject to company disciplinary procedures. The existence of these factors can point towards limb (b) worker or employee status. However, their absence is not fatal to establishing employee or limb (b) worker status, particularly where it is part of a calculated position by the employer to avoid worker status.

Example

An individual has a manager in the business they complete work for that allocates them work. The individual is also able to advise and assist other members of a team in the business and is subject to the company disciplinary procedures and other procedures and policies. This integration into the organisation could be used to support factors of an employee or limb (b) worker relationship to their employer.

Equipment

While not necessarily decisive on its own, evidence that the engager provides the mandatory equipment necessary to do the job (such as clothing, tools) can be a pointer towards employee or limb (b) worker status.

Example

Television salesmen were being supplied with cars by their employer and the use of employer equipment was a relevant factor in determining their employee status in a Court case.

How the individual is paid

An individual that is paid by reference to their output or profit share rather than hourly wage or annual salary is more likely to be consistent with self-employed status. However, it is also possible for an employee or other worker to be paid by reference to their output (such as pieces produced, or tasks performed).

Example

An office worker is paid £15 an hour for their role as a receptionist, completing on average 20 hours of work a week. As the individual is paid for their time, as opposed to output, this factor is likely to be consistent with a limb (b) worker or employee employment status.

Exclusivity of the arrangement

This concerns an individual’s ability to work with other rival businesses. In general terms, the more exclusive the arrangement, the more likely that this would be consistent with employee status. Exclusivity may also be a pointer to limb (b) worker status, but as limb (b) workers often have more flexibility in working for different (and sometimes rival) organisations it would not be decisive.

Example

A consultant works for a number of different organisations, with varying clients each week. This factor makes it more likely the individual may be self-employed.

Example

An individual provides their services as a driver through a number of different apps. They are free to choose which app to use to obtain work, but the way in which they provide the service through each app is tightly constrained by the relevant app. While the freedom to work for rival businesses may point towards self-employment, the level of control to which the individual is subject when working through any app may point towards limb (b) worker status.

Genuinely in business on your own account

Is best understood as running your own business and is often linked to other factors such as providing or using your own equipment, having financial risk in your work and/or whether you had a pre-existing business. If the individual provides or uses their own equipment, has financial risk in their work and/or had a pre-existing independent business, the individual may be more likely to be self-employed. However, the presence of any of these factors including a pre-existing business is not fatal to a person being either a worker or an employee. It will depend on an assessment of all the circumstances.

Example

A painter supplies their own paint and brushes, has direct relations with their clients/customers and negotiates the rate of pay for each individual customer. These factors make it more likely the individual is genuinely in business on their own account and self-employed.

Section 4: Special circumstances and developments in the labour market

Gig economy

New forms of work have emerged in the so-called ‘digital / gig / platform / crowd’ economies. Recent court cases have shown that the purpose of employment law is to protect those working for others and regardless of whether you work in the gig economy, if you satisfy the tests around employee or limb (b) worker status you will be entitled to the corresponding statutory employment rights and protections (as described in the Employment rights table. The example below provides an example of how control can be exerted by an employer (or engager) in a digital setting via an app. The control in the example would be enough to satisfy the limb (b) worker status, providing other factors were also consistent.

Example of control via an app

  • the engager restricts communication between the passenger and the driver to the minimum necessary to perform the particular trip and takes active steps to prevent drivers from establishing any relationship with a passenger capable of extending beyond an individual ride
  • the remuneration paid to drivers for the work they do is fixed by the engager and the drivers have no say in it (other than by choosing when and how much to work). The engager fixes its own “service fee” which it deducts from the fares paid to drivers. The notional freedom to charge a passenger less than the fare set by engager is of no possible benefit to drivers as any discount offered would come entirely out of the driver’s pocket
  • the contractual terms on which drivers perform their services are dictated by the engager
  • although drivers have the freedom to choose when to work, once a driver has logged onto the engager’s app, a driver’s choice about whether to accept requests for rides is constrained by the engager
  • the engager exercises a significant degree of control over the way in which drivers deliver their services (vets the type of car and uses the technology to exercise control over the drivers)

Where an individual is a limb (b) worker or an employee, in all circumstances their employer must determine the worker’s working time for National Minimum Wage purposes. For further details for determining working time for the purposes of the National Minimum Wage or the National Living Wage, including for gig economy / platform businesses see How to calculate the Minimum Wage.

Zero-hours contracts

Generally, this is best understood as a working arrangement in which the employer does not guarantee the individual any work, and the individual is not obliged to accept any work offered. Zero-hours contracts can allow employers to adapt to changes in their circumstances, supporting workforce flexibility, making it easier to hire new staff, and increasing the pool of people available to work. These contracts can also give individuals more choice and the ability to combine their work and other commitments such as for those who are retired or with caring responsibilities. For example, zero-hours contracts are used in the hospitality sector where service take up or demand cannot be guaranteed, or in the healthcare sector for staff that work as locums in a specialised role such as a surgeon or doctor and flexible working suits their current circumstances.

The employment status of an individual on a zero-hours contract will depend on the facts of the relationship and as such, a zero-hours contract does not dictate your employment status and an individual could qualify for any employment status (employee, limb (b) worker or self-employed) for employment rights purposes. An example of individuals on zero-hours contracts who were found to be employees by the Courts can be seen in this example:

Example

A number of care workers sign a contract labelled zero-hours contract which includes a ‘no mutuality of obligation’ clause. However, this clause does not reflect the true agreement between the two parties as the care workers are required to undertake work regularly and carry out that work in specialist positions which are very important for the employer’s business. Overall, the reality of the working relationship here is likely to be that the agreement does includes mutual obligations for the individuals to accept shifts and for the employer to offer work. The workers are therefore more likely than not to be employees.

Freelancers, contractors, consultants and interims

There is no definition of these categories in legislation. Although freelancers, contractors, consultants and interims are often self-employed, they could be either self-employed, a limb (b) worker or an employee depending on the reality of the relationship, whether they work for a client or if they are employed by an agency or umbrella company see the agency worker section. Therefore, a freelancer, contractor, consultant and interim could be entitled to the rights associated with limb (b) worker or employee status.

Example

A plumber undertaking several jobs for different customers is likely to be neither an employee nor a limb (b) worker. They are likely to be genuinely self-employed and enjoy the freedoms that this status affords them. However, this plumber could then secure a contract on a large contract site as one of the resident plumbers. If this is on a purely sub-contracting basis to deliver a certain task, the individual may still be self-employed. But if the individual is hired to carry out a personal service due to their skillset, and is unable to send someone else in their place to carry out the work, it is more likely the individual is a limb (b) worker. The plumber could therefore be a limb (b) worker for one contract whilst still being self-employed for other work contracts.

Agency workers

You are an agency worker if you have a contract with an agency but you work temporarily for a hirer. Agency workers may qualify for employee or limb (b) worker employment rights depending on their relationship with their employer. Agency workers are usually employed by the employment business itself unless an intermediary is involved (i.e. an umbrella company). It is important to identify who the employer is as they are responsible for ensuring that agency workers receive employment rights.

Agency workers receive certain protections, irrespective of whether they are an employee or a limb (b) worker such as the right to be paid the National Minimum Wage for hours worked, the right to paid annual leave, whistleblowing protections, and pension auto-enrolment. They also have additional protections under the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which aim to ensure that work-seekers have free access to the labour market, can move between jobs within the labour market, and can use the recruitment sector with confidence. They also receive protections under the Agency Workers Regulations 2010. This gives agency workers the entitlement to the same core employment and working conditions as if they had been recruited directly. Some protections apply from day 1 and some will apply only once they complete the 12-week qualifying period in the same role with the same hirer. Read more about agency workers’ rights as well as information specifically on how and what they must be paid when working through an umbrella company.

Example

A substitute teacher’s working relationship is that they work on a fixed assignment for 6 months. The teacher is not employed directly by the school instead they are on a contract with an employment agency. In this example, the teacher’s employer is the employment agency and is therefore responsible for ensuring they get the rights they are entitled to, whether they are an employee, worker or contracted as self-employed.

Employee shareholder status

Employee shareholder is a separate employment status. Most employees who own shares in a company they work for do not fall under the employee shareholder status and keep their employee status. Employers must follow certain rules when offering employment shareholder status to their employees.

An employee shareholder is someone who works under an employment contract and owns at least £2,000 worth of shares in the employer’s company or parent company. Whilst employers can choose to provide more generous employment rights than the statutory ones, employee shareholders are entitled to all employee employment rights except for:

  • protection against unfair dismissal - apart from dismissal on grounds of discrimination and in relation to health and safety
  • statutory redundancy pay
  • the right to request flexible working - except in the 2 weeks after returning from parental leave
  • certain statutory rights to request time off for training

Employee shareholders must give 16 weeks’ notice if they want to come back early from:

Office holders, police and the armed forces

There are special provisions which apply to office holders, (for example which includes certain company directors, clergy, judges), police officers and members of the Armed Forces and specific advice should be taken.

Volunteers

Volunteers are not defined in primary legislation, although Section 44 of the National Minimum Wage Act 1998 does provide an exemption for ‘voluntary workers’. Volunteers are not exclusive to the charitable sector and can be found across both the public and private sector. Most volunteers participate in this way either for philanthropic reasons, or to build skills and experience in a given area. Volunteers are not legally obliged to work a set number of hours or at all. Volunteers who willingly accept to be engaged on a voluntary basis are neither employees nor limb (b) workers and therefore not entitled to any employment right associated with these statuses. However, for some, the roles they will be undertaking will be very similar to, if not the same as, paid individuals alongside them. Volunteers aren’t paid for their time but can be paid for any out-of-pocket expenses. These expenses could include travel, postage and telephone costs if working from home, and essential equipment, such as protective clothing. If a volunteer receives any type of reward or payment other than expenses, this could impact their employment status, and they could be classed as an ‘employee’ or ‘worker’ and therefore be entitled to employment rights and protections.

Interns

Internships are sometimes called work placements or work experience and are generally understood as being where an individual works so as to gain relevant professional experience to improve their career prospects. These terms have no legal status on their own and do not dictate an individual’s employment status. Interns can be volunteers, limb (b) workers or employees depending on the facts of the relationship. If they are a limb (b) worker or employee, they are entitled to exactly the same employment rights as any other limb (b) worker or employee. However, true volunteers are not entitled to employment rights. For example, an employer would not have to pay the minimum wage if an individual is undertaking work experience that only involves shadowing an employee, meaning no work is carried out and they are only observing.

Apprenticeships

Apprentices are entitled to the same employment rights as other employees working at similar grades or in similar roles (including paid holidays, sick pay, and other benefits and support). Apprentices must spend at least 20% of their normal working hours training and the National Minimum Wage rate is different for apprentices.

Section 5: Case studies and sectoral examples

These indicative examples highlight how factors in different sectoral working relationships can be considered when determining employment status. The employee or limb (b) worker tests apply across all sectors.

Case study: Limb (b) worker in the transport sector

Example

A courier driver works for a number of organisations including a delivery firm, for which they complete a range of shifts each week on a zero-hours contract. When they arrive for work with this delivery firm, they are given a list of the packages that need to be delivered in a specified order and with a specified route to follow. The driver must use their own van, wear the organisation’s uniform and stick-on vehicle branding from the delivery firm. They are paid per delivery (though there is no scope to vary the route/order). The driver also has a limited right to sub-contract the work if they were unable to work - they must notify the company and the substitute driver must have completed a similar training course.

For the purpose of their relationship with this delivery firm, it seems likely the individual is not working as part of their own professional business as the degree of control exerted by the delivery firm is too great. The courier driver is expected to complete the shifts they have accepted, use company branding and uniform, and follow required routes. The driver also appears to be required to provide a degree of personal service that’s more compatible with limb (b) worker or employee status than self-employed status as they only have a limited right to subcontract with an individual who has completed similar training. The individual therefore satisfies the personal service requirement and is working under a degree of control which is consistent with limb (b) worker status. There are other relevant factors for this example such as that the individual is not subject to an exclusive relationship and works for other organisations, is paid per delivery as opposed to a salary and provides their own van (equipment) pointing towards a more flexible working arrangement than an employee. Overall, it is likely this individual is a limb (b) worker.

Case study: Self-employed developer in the professional business services sector

Example

An IT specialist, with a pre-existing independent business, is brought into a large organisation to work on a project for 3 months, a few days a week, to improve the organisation’s website. The individual is highly skilled as a website designer and during the project, the individual is given freedom for how and where the work is completed but there is an expectation the specialist will be available during normal working hours of the organisation on the days they are working. The individual is not subject to the same behavioural guidelines as permanent staff and the relationship is not exclusive. The individual is able to take on additional work during the length of the contract without permission and is able to subcontract out their work if required. The individual uses their own equipment and is paid for their services at a day rate.

Overall, factors such as that the individual has a high amount of control for how the work is undertaken and that the individual can sub-contract their work out, it seems likely the individual is not a limb (b) worker or employee. Instead, those factors point to the self-employed status and that the other party to the contract is a client or customer. This includes that the individual is not integrated into the business through being subject to the same behavioural guidelines as permanent staff, the relationship is not exclusive and that the individual uses their own equipment and has the freedom to negotiate their rate of pay.

Case study: Limb (b) worker in the healthcare sector

Example

An individual usually works one day per week in a cosmetic surgery practice as a plastic surgeon, with some flexibility around turning up to work on that day. The individual is highly skilled, decides how the surgery should be performed and is not required to wear a uniform but general personal protective equipment. The work has to be performed at the surgery during opening hours. The individual is integrated into the business (the cosmetic surgery practice markets the surgeon as “our surgeon”) but they also run other separate businesses. They are paid on a day-rate-basis which the individual has negotiated with the practice and they are provided surgical equipment to perform the work. It is expected that the individual will perform the surgery themselves and the individual is unable to send a substitute.

In this example, there is evidence of personal service as the surgeon carries out the procedures themselves. However, there is no obligation for the practice to offer work to the surgeon and no obligation on the surgeon to accept offer of work. The individual is subject a low amount of control as to how the work is carried out and requirements around uniform but there is control for when and where the individual has to work (during opening hours at the surgery). The arrangement is also not exclusive (as the surgeon works for other organisations), and the individual has negotiated their day rate of pay as opposed to receiving a salary. Overall, it seems this individual is unlikely to be an employee because the practice is not obliged to offer them work, nor is the surgeon required to accept work. The surgeon also has other businesses which might suggest they are self-employed. However, based on the degree of control that the practice exerts over the surgeon suggests that the surgeon’s relationship with the practice is that of a limb (b) worker rather than self-employed.

Case study: Employee in the hospitality sector

Example

A hotel cleaner is allocated cleaning tasks at the start of each shift, told what equipment to use for each task and provided with a uniform to wear. The individual is also supervised by a cleaning manager employed by the hotel who checks on progress regularly, with the individual’s performance closely monitored. As prior hotel training was provided, the individual is not entitled to send and pay any substitute to perform the work. The individual has a contract to perform a certain number of hours a week and be remunerated for those hours on an hourly basis.

The individual is under a large amount of control from the hotel via performance management and as they are required to wear a uniform. There is also a mutual obligation to provide work and for work to be undertaken as set out in their contract, with the individual not able to provide a substitute. Other relevant factors include the individual being an integral part of the business’ ability to run, the lack of financial risk the individual is under and the individual’s requirement to use the hotel’s equipment to carry out the work. It is likely the individual is an employee.

Case study: Limb (b) worker in the construction sector

Example

An individual is engaged as a contractor to assist with the construction of an office block which is running behind. The individual can turn up and work as they wish, answering to a foreman who gives the individual a daily list of tasks to carry out. The foreman will make regular checks on the quality of the individuals’ work. The individual will continue to get paid for as long as the overall building work takes and if the individual finishes their tasks early, they will be given more. If the individual does not finish, they can continue the next day. All required equipment is provided. The firm expects the individual to do the work personally and not send a substitute.

The example sets out that the builder / labourer is under a degree of control while they work as they are monitored by the foreman. There is also evidence of personal service as the builder/labourer is not able to send a substitute. Overall, it seems likely the individual is a limb (b) worker. Other factors are also consistent with limb (b) worker status rather than self-employed status include that the equipment is provided by the building firm (not the individual). Employee status is also less likely due to factors such as lower evidence of mutuality of obligation, the individual’s freedom over when they work, that they are paid for work done as opposed to a salary and the lack of integration into the business. $CTA

Section 6: Further resources

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