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Employment status

Overview
The term 'employment status' is the arrangement under which an individual is engaged to work for an employer. There are three main categories of employment status:
  • employees, hired directly by the organisation
  • workers (for example, casual, agency or freelance workers, performing services personally for the organisation, or working on a seasonal basis)
  • the self-employed (for example, contractors).
Employees are covered by the full range of statutory employment rights. Workers have a more limited range of employment rights. In practice the dividing line between employee and worker can often be blurred.
 
Employment status affects employment rights and tax and National Insurance liabilities, and liability for accidents and loss caused by the conduct of an individual.
 

Recent developments

Foster carers are 'employees'

The Employment Appeal Tribunal (EAT) has ruled that foster carers who operated under an agreement with a local authority were employees of that authority. 

In their judgement, the EAT outlined that the level of control placed upon the carers by the authority meant that a contract of employment was present. This control extended beyond the usual statutory expectations placed upon foster carers, with the claimants being paid a steady fee regardless of whether any children were placed with them, had to attend weekly meetings and could not undertake alternative employment. 

The judge was clear that this ruling does not apply to all foster carers and that future rulings will take each individual circumstance into account. However, this ruling will be considered by future tribunals. 

For more information, please refer to our in-depth case report

Changes to IR35 in private sector

These changes, originally set to come into force from April 2020, have been postponed to April 2021 as a result of the 2020 coronavirus outbreak. Latest commentary from the government strongly indicate they will not be delayed again. 

Currently, PCPs working in the private sector are solely responsible for determining employment status. This has previously provided PSCs the opportunity and incentive to pay the wrong amount of tax. From April 2021, eligible large and medium sized organisations engaging contractors through intermediary companies will also be responsible for assessing the employment status of those contractors. Under the new rules, where workers are engaged through their own companies, responsibility to apply IR35, and to pay any associated tax and National Insurance contributions (NICs), will fall to the private company, agency or other third party paying the worker’s company.

To be eligible, an organisation must meet at least two of the below criteria:

  • have over 50 employees
  • have a net turnover in excess of £10.2m
  • have over £5.1m on their balance sheet.
Consultation looked at new rights for all flexible workers

In 2019, a government consultation examined whether new laws should be introduced to protect flexible workers and prevent 'one-sided flexibility'. The consultation considered:

  • introducing compensation for workers who have shifts cancelled at short notice
  • providing workers with a reasonable period of notice of assigned shifts
  • protecting workers against detriments if they decline shifts which are offered on short notice.

The consultation closed in October 2019 and government response is expected.