What Defines an Employee?
In Employment Law, the rights that are accessible to someone vary depending on their employment status. This an important factor to take into account when identifying your obligations as an employer and in the event of an Employment Tribunal. As the statutory definitions of workers and employees are accompanied by some caveats (if you’re classified as a worker), the government’s The Good Work Plan is proposing reforms to enable workers to access rights that they currently do not possess.
Why Does Employment Status Matter?
Employment Law distinguishes between three categories of individuals, these categories have varying employee rights and employer obligations attached to them:
- Self-employed independent contractor (anyone who is neither an employee or worker will be self-employed for Employment Law purposes)
The distinction between the three is important for a number of reasons. Firstly, employee status provides legal protections, for example the right to not be unfairly dismissed and the right to receive a redundancy payment. Employer’s obligations are also implied into a contract of work, such as mutual duty of trust and confidence. Secondly, in the event of a business transferring to a new employer, TUPE Regulations are only applicable to employees, and thus only employees are automatically transferred to any purchaser. For workers or self-employed independent contractors, there is no guarantee, or legal obligations, that their employment will be transferred over, or that they will receive compensation if their employment ceases.
Furthermore, the ACAS Code of Practice on disciplinary and grievance procedures only applies to employees, again reducing the legal protections that workers and contractors have. Tax treatment is also determined by an individual’s status, and their status is outlined by HMRC. Being defined (or not defined) as an employee affects vicarious liability, employer’s liability insurance and health and safety also.
Overall, employment status matters greatly as it directly affects the rights accessible to the individual, alongside their financial security and the responsibilities and obligations of the employer.
The statutory definitions of employee and worker are not comprehensive. An employee is defined as “an individual who has entered into works under (or where the employment has ceased, worked under) a contract of employment” Section 230 (1) of the Employment Rights Act 1996. A contract of employment means “a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing” Section 230 (2) of the Employment Rights Act 1996.
Comparatively, a worker is defined as “an individual who has entered into works under (or, where the employment has ceased worked under): a) a contract of employment or b) any other contract, whether express or implied and (if it is express) whether in oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party”. However, during a whistleblowing claim, a worker has a wider definition than ordinary.
There are four elements to satisfy the statutory definition of an employee. These are: existence of a contract, personal service, business undertaking/profession and mutuality of obligation.
The Good Work Plan
The government published The Good Work Plan on 17th December 2018, which included a number of proposed reforms to employment legislation within the UK, the government accepted the majority of these in early 2019. The reforms are set to include:
- A right to request a more stable and predictable contract for workers
- Currently, agency staff and those classified as workers do not possess these rights
- Easier for casual staff to establish continuity of employment
- Legislation is being written to extend the current gap to four weeks before continuous employment is broken, making it fairer for rota based employees to access their rights
- Employment status tests to be refined after further research (online employment status tool to be developed)
- Reference period for holiday pay to be 52 weeks rather than 12
- The current legislation is unfairly biased towards non-seasonal, non-rota and full-time employees
It is clear that the classification of employees and workers is extremely important when it comes to the rights that they are entitled to and the legal obligations that an employer has to adhere to.
If you’d like to find out more about how you can effectively manage employees and workers throughout your workforce, get in touch with our friendly payroll and HR team on 0330 057 4553. Alternatively, if you’d like to take a look at how our integrated Payroll and HR system can benefit you and your organisation, you can book your free demonstration here.