What's in a name? Employment statuses defined
You’ve survived those difficult first six months. Sales are starting to take off. Your workload – never exactly light – is increasing and shows no sign of slowing down. You eventually reach the conclusion: it’s time to take on another pair of hands.
What sort of hands those are, whether an experienced hire or a fresh-out-of-uni intern, will impact on a number of things: budget, management time, training, and (perhaps most importantly) the new hire’s legal status.
There are five main categories of employment status, each with distinct implications: self-employed, intern/volunteer, apprentice, worker, and employee. It always pays to know what your obligations to staff are as an employer – so BrighterBox, with help from employment law specialists JLJ Legal, has a handy introductory guide for you.
There is one overriding thing to remember when categorising staff: employment status depends on the facts of the engagement, not how you label a position. Just calling someone a volunteer does not make them one.
There are a number of factors that can sway status one way or another, making this a potentially tricky issue. It’s a topic on which Tribunals have been making decisions for years. It is not a matter of simply adding up the factors, but of stepping back and considering the picture as a whole and looking at the reality of the relationship and the intention of the parties.
In order to maximise the chances of the different labels of employment status being reflected truly in law, and minimise the risk of being sued, below is our preliminary list of Dos and Don’ts, helpful to any business.
1. Self-Employed Contractors, Consultants, and Freelancers
A self-employed contractor, consultant or freelancer is someone who works for themselves:
· Have a self-employed contractor/consultant/freelance contract which is for a fixed-term or project-based
· Have the right for the contractor to send a substitute if they are unavailable and put this into practise
· Have a right to terminate the contract at will
· Pay your contractor via an invoice issued by them to you at the end of each week or month
· Have the contractor use their own equipment
· Let the contractor work their own hours
· Allow the contractor to take financial risk, for example engaging their own team to complete the project or spend money on materials
· Exert too much control over the contractor in terms of how or when they do their work
· Pay the contractor through payroll
· Integrate them too much into the company i.e. provide them with business cards or uniforms
· Pay them holiday pay or sick pay, or otherwise treat them the same as your employees
2. Volunteers and Work Experience
A volunteer or work experience candidate is someone who works, usually without pay, in order to gain work experience or satisfy requirements for a qualification:
· Focus on the reason for the arrangement being for the volunteer to learn from you by shadowing
· Pay for the volunteer’s reasonable travel and lunch expenses
· Have insurance that covers the volunteer
· Provide supervision and support
· Have a volunteer agreement with the volunteer professionally drawn-up
· Control the volunteer or put unreasonable obligations on them
· Allow them to do substantive work
· Exploit the volunteer
An apprentice is someone who learns a trade from a skilled employer, having agreed to work for a fixed period at lower wages. Note that an apprentice is also an employee:
· Ensure you train the apprentice and allow them time off to study
· Pay the correct apprentice wage according to their age and National Minimum Wage regulations
· Run the apprenticeship in line with the relevant government scheme you are partnering with in order to employ the apprentice
· Have the apprenticeship agreement for a fixed-term
· Subject them to company procedures and treat them as an employee including any relevant rights
· Exploit the apprentice
· Give them challenging tasks without supervision; they are there to learn
A worker is someone who works for an employer and performs personally any work or service:
· Exert some control over them and integrate them to an extent in your business
· Engage them on a specific worker contract rather than an employment contract and get professional advice on the difference
· Ensure that you take into account agency workers’ rights if appropriate
· Ensure the worker follows relevant policies and procedures to your business
· Forget that workers, although not employees, are entitled to National Minimum Wage, Working Time Regulations and holiday pay
· Allow them to send a substitute - a worker provides personal service to the business
· Dismiss them without getting advice
· Discriminate against the worker
An employee is someone who works under an employment contract and has extra employment rights and responsibilities which don’t apply to other categories of employment status.
· Take reasonable control: over how they perform the work, when they do the work and where they do it
· Integrate them fully into the business
· Pay them through payroll
· Have a right in their employment contract to terminate their employment and pay in lieu of notice, or pay without notice if termination is for gross misconduct
· Pay them sick pay and holiday pay
· Ensure you have a contract of employment with the employee that suits their particular role and which provides enough protection over certain aspects such as confidentiality
· Provide policies and procedures including disciplinary and grievance, and subject the employee to them
· Allow the employee to work for another company without consent
· Dismiss without subjecting the employee to proper procedures and getting advice
· Discriminate against the employee
· Try and make major changes to the employee’s terms and conditions without consulting them
Remember, employment status dictates how much protection an individual is entitled to in respect of unfair dismissal, discrimination, holiday entitlement, and many other issues. This is just an introductory list and is not comprehensive. It is always best to GET ADVICE about your particular individual situation.
Jane Johnson, who helped inform this blog, is a director of JLJ Legal - you can reach her on firstname.lastname@example.org for queries on your employment contract or anything employment law-related.
*Editor's note: This blog was originally published in 2016 and has since been updated.