In the UK employment relationships fall into one of three categories. They are 'worker', 'employee' or 'self-employed'. Determining the category that an individual falls under is significant for both the individual and contracting organisation, because at the heart of these categories lies three key issues.
The issues are as follows:
(1) Who has responsibility for liability matters such as tax and National Insurance Contributions (NIC), workplace injury and damage to others,
(2) what contractual rights does the contracting party have with respect to the individual's activities, and
(3) what statutory rights does the individual accrues such as unfair dismissal rights, maternity rights, redundancy pay, etc.
So, who is a 'worker'?
Most individuals except for self-employed persons, are workers.
The Working Time Regulations 1998 defines 'worker' as an individual who has entered into or works under a 'contract of employment or any other contract, whether express or implied, the individual undertakes to perform or to do personally any work or services for another party.'
In James v Redcats (Brands) (2007) IRLR 296 the Employment Tribunal outlined two factors that are critical to identifying whether an individual is a worker. It was stated that this depends on whether the individual and organisation are involved in mutuality of obligations during the time the worker undertakes work for the organisation and personal service being the the dominant purpose of the contract.
Being a worker affords us rights including working time limits and minimum wage. However, more rights are afforded to an 'employee'. For example s 94 (1) ERA affords employees the right to not be unfairly dismissed, but this right is not afforded to workers.
Who is an 'employee'?
Section 230(1) Employment Rights Act defines an employee as an individual who has entered into or works under a contract of employment.
Section 230 (2) defines a 'contract of employment' as a contract of service or apprenticeship, whether express or implied, and (if its express) whether oral or in writing'.
Who is 'self-employed'?
Unlike the employee, the self-employed person lacks a contract of employment with an employer. Such an individual is usually contracted to provide services for a fee that they have likely decided independently. The self-employed person has particular legal rights, but under existing statutes, these are fewer than those afforded to employees.
The limits of statutes in determining the category that individuals fall under:
Statutes have not always been sufficient in determining which of the three categories an individual falls under. As a result, case law has been used to help us determine who is a worker, employee or self-employed. A significant amount of the case law focuses on the differences between an employee and self-employed. Three tests have been developed to determine the differences between them. They are the control test, the integration test and the multiple test. You can read more about them here.