The Government has published new guidance on determining the employment status of individuals. Status is key in determining individual rights and protections and the new guidance aims to provide clarity to help both individuals know their rights and businesses understand their obligations.
An individual’s employment status determines the minimum rights and protections they are entitled to. The rights are designed to protect individuals from unfair working practices and cover a range of employment issues including pay, dismissal, leave entitlement, redundancy, working conditions and notice.
There are three main types of employment status:
- Employees – have the most rights and responsibilities.
- Workers – have fewer rights and responsibilities.
- Self-employed – have the least protection, but also tend to have greater flexibility.
Employment status is not solely dependent upon the terms of appointment agreed. Status is also determined by the relationship between the parties, taking into account all of the circumstances. For this reason, employment status is fact specific and can often be difficult to determine. The new guidance compliments existing guidance and aims to provide clarity by issuing practical advice on:
- employment status and how it determines employment rights;
- factors determining an individual’s employment status;
- special circumstances and recent developments in the labour market; and
- how employment status should be determined for different sectors.
The guidance also includes specific advice for micro businesses, start-ups, SMEs and the rights that gig economy workers are entitled to.
Clarity around employment rights supports empowerment and creates certainty for businesses, and helps individuals know their rights. The guidance may also help businesses to avoid unnecessary disputes, costs or fines if all parties are clear on employment status at the outset.
The ramifications for getting employment status wrong can be significant and costly and businesses should assess each engagement on its own facts to understand their obligations. Whilst the guidance provides additional clarification, the issue of employment status remains complex. Each employment relationship will be fact specific and the guidance should not be relied upon as a substitute to seeking advice where necessary.
For further information on employment status, please contact a member of the Employment Team.