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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

New employment status legislation plus wide-ranging changes to worker rights

During 2017, Matthew Taylor published a review which, amongst other things, suggested that employment status needed clarifying and the 'worker' category should be renamed 'dependent contractor'.

Following a consultation on this matter, the government’s ‘Good Work Plan’ released in December 2018 has confirmed that legislation will be introduced to clarify current employment status tests. There will also be updates made to current guidance and online tests which are available to determine status.

Additional changes were also announced within the plan, although these also require additional legislation. These include making a right to a written statement of main terms a day-one right, increasing the required information which has to be included on written statements and providing a right for all workers to request a more stable contract. 

Changes to IR35 in public sector

The IR35 tax rules governing off-payroll working in the public sector changed on 6 April 2017. From this date, responsibility for deciding whether the rules apply shifts from the worker’s intermediary company to the public body, agency, or third party paying the intermediary, which will then be responsible for deducting relevant tax and NICs from the fee it pays to the intermediary organisation where appropriate.