Employee or Worker: Legal Differences Explained

An individual’s legal rights and entitlements at work can differ significantly depending on whether they are classed as an employee or worker.

In this guide, we explain the differences between these two types of employment status, including how legal status as either an employee or worker determine employment rights and responsibilities within the workplace.

 

Definition of an employee

 

An employee is someone who works under a contract of employment, ie; an agreement setting out the terms and conditions governing the working relationship between the employer and employee, including the rights and obligations between the parties. This is also referred to as a contract of service.

An individual will usually be classed as an employee if they have an employment contract, either verbally or in writing, whether permanent or fixed-term, under which they are provided with regular work that they are personally required to undertake under the terms of that contract.

Presently, there is no single legal test to determine if someone is either an employee or worker but, broadly speaking, an individual will be classed as an employee in circumstances where they satisfy all of the following three principle tests:

• Personal service The individual must be required to provide their services personally, rather than being able to subcontract the work to someone else;
• Mutuality of obligation The employer must be obliged to provide the individual with work, and the individual must be obliged to do that work, in return for an agreed sum of wages, and
• Control The employer must exercise a sufficient degree of control over the way in which the individual carries out the work, on terms and conditions laid down by the employer.

 

If an individual satisfies some but not all of these three tests, they would usually be considered a worker. Those who do not satisfy any of these three tests are likely to be classed as self-employed, rather than as either an employee or worker.

 

Definition of a worker

 

Where the working arrangement is far more casual, in other words, the employer is not required to provide the individual with work, and the individual is not required to do any work, they are much more likely to be classed as a worker rather than an employee.

As such, the worker category is much broader than the employee category and can include the following:

• Agency or temporary workers whereby an agency finds their work and pays their wages.
• Short-term workers, hired directly by an employer and who supply their services on an irregular or casual basis with minimum guaranteed hours.
• Freelance workers, where those who are self-employed for tax purposes may still be classified as workers for employment rights purposes.
• Home-workers or piece-workers, although these types of workers have even fewer statutory rights than ‘standard’ worker status.

 

In particular, someone would be classed as a worker if they have a contract where they are personally required to perform work or provide a service for payment or reward, but where there is very little or no obligation to receive or do any work under this contract, and with no adverse consequences if the work is refused.

It is the ability to accept or reject any offer of work, or the lack of mutuality of obligation, that usually distinguishes a worker from an employee. Indeed, businesses will often use contracts that exclude this principal element to avoid individuals acquiring employment status.

That said, while the terms of any written contract will be the starting point in determining employment status, a court or tribunal asked to decide the question of status can still look beyond the contract if there is clear evidence to show that it does not reflect the true relationship between the parties.

 

Differences between an employee and a worker

 

The legal distinction between an employee and a worker will be crucial in determining rights and responsibilities within the workplace, not least because many employment rights stem from an individual having ‘employment’ status, with workers having lesser rights than employees.

Although all employees are, in fact, also workers, as a sub-category of workers employees have additional statutory employment rights that do not apply to workers who aren’t employees. Indeed, only employees are entitled to all statutory employment rights.

Those classed as employees and workers will typically be entitled to the following:

• To be given a written statement of employment particulars – a principal statement on the first day of employment and the full written statement within 2 months of the start of employment.
• To be notified of any changes to the written statement within one month of the variation being made.
• To be paid the national minimum wage
• To receive a payslip
• To protection against unlawful deductions from wages
• To the statutory minimum level of paid holiday
• To the statutory minimum length of rest breaks
• To not work more than 48 hours on average per week, or to opt-out of this right if they choose
• To protection against unlawful discrimination
• To protection for whistleblowing, ie; reporting wrongdoing in the workplace
• To not be treated less favourably for working part-time
• To be accompanied at a grievance or disciplinary hearing
• To receive statutory sick pay, statutory maternity or paternity pay, as well as statutory adoption pay and/or shared parental pay
• To the right to request flexible working

 

The following entitlements are only available to those with employee status, with some requiring a minimum qualifying period:

• To a minimum notice period if employment is being terminated
• To protection against unfair dismissal (except in automatically unfair situations, which applies to both)
• To time off for emergencies
• To statutory maternity, paternity, adoption and shared parental leave (whereby a worker is only entitled to pay and not leave)
• To statutory redundancy pay with at leat two years’ continuous employment

 

Impact on employment rights

 

Below we examine the main statutory rights that an employee will benefit from as a special sub-category of worker, from the minimum notice period to statutory redundancy pay.

 

Minimum notice period

 

Employees are entitled to the notice stated in their contract of employment or the statutory legal minimum notice period, whichever is the longer. Employers can offer longer notice periods than the relevant statutory minimum, but cannot give less.

The legal minimum notice required to dismiss an employee is one week if they have been employed between one month and two years, or one week for each complete year of employment up to a maximum of twelve weeks.

An employer can only dismiss an employee without applying the minimum statutory notice period or giving payment in lieu of notice in circumstances where the employee has committed an act of gross misconduct, ie; an act so serious that it justifies dismissal without notice, for example, theft or violence.

 

Protection against unfair dismissal

 

Employees are protected against unfair dismissal, in other words, being dismissed for a reason, or in a manner, that is considered unfair. In most cases, the individual will need to have completed a minimum of two years’ continuous service to be able to bring a claim for unfair dismissal, unless the employer can show the reason for dismissal was automatically unfair.

By way of example, it would be regarded as automatically unfair to be dismissed because the individual is pregnant or on maternity leave. Here, a claim for automatic unfair dismissal does not require a minimum length of service.

It would also be classed as unfair if the employer failed to undertake proper investigations into, for example, allegations of misconduct or underperformance, or where the individual was not afforded an opportunity to counter any such allegations. In other words, where the employer fails to follow reasonable procedures during the disciplinary and dismissal process, the individual may have a claim for unfair dismissal.

In either case, the individual may be entitled to seek an award of damages from an employment tribunal and, in some circumstances, even reinstatement.

 

 

Time off for emergencies

 

Employees are entitled to limited time off to deal with an emergency involving a dependant. This could be to care for a child or grandchild, spouse or partner, a parent, or anyone who depends on the individual to care for them.

How much time off they will be allowed is not statutorily defined, rather it is a reasonable amount to deal with the emergency in question. It will all depend upon the situation. Employees should be made aware of the process to request emergency time off, and managers should be trained on how to handle such requests consistently and fairly.

 

Statutory maternity, paternity, adoption and shared parental leave

 

Employees, albeit subject to the required minimum length of service where relevant, may be eligible for both statutory maternity pay and leave, or other similar rights relating to pregnancy or adoption.

Qualifying employees can take up to 52 weeks’ maternity leave, together with up to 39 weeks statutory maternity pay. In respect of paternity leave, eligible employees can choose to take either 1 week or 2 consecutive weeks’ leave after the birth or adoption of the child, together with paternity pay.

Some employees may also be eligible for shared parental leave. This enables an employee to ‘sacrifice’ part of their maternity leave to allow the other parent to stay at home and care for the child, or even to allow both parents to be at home at the same time.

 

Statutory redundancy pay

 

Subject again to a minimum length of service, employees may have certain redundancy rights. Redundancy is when someone is dismissed because their job no longer exists. This might be because the employer is doing things in a different way, changing location or even closing down.

In these circumstances, the individual has a number of rights, not least all qualifying employees under notice of redundancy have the right not to be unfairly selected for redundancy and to reasonable time off to look for a new job, not to mention the possible right to redundancy pay depending on their length of service.

 

Employee or worker: how to check employment status

 

Deciding someone’s employment status can be complicated, not least because there is no single legal definition for either an employee or worker. As such, various different factors can come into play when determining an individual’s legal status within the workplace.

Individuals are more than likely to be classed as an employee if some or all of the following circumstances apply:

• They have a written contract of employment or statement of terms and conditions, which may be described as an “employment contract” and may use words like “employer” and “employee”
• They are required to attend work on a regular basis, unless on leave, for example, annual, sick or maternity leave
• They are required to do a minimum number of hours and expect to be paid for the time worked
• Their employer is required to provide them with regular hours or work
• They are expected to carry out this work themselves ie; they are not permitted to use a substitute to undertake the work in their place
• They are not permitted to refuse to work or refuse to come to work
• Their employer is in charge of how, when and where they work
• Their employer not only provides the work they must do, but any tools, equipment, materials, facilities and uniform required to do that work
• Their employer deducts tax and national insurance out of their wages under the Pay As You Earn (PAYE) system.

 

Individuals are more than likely to be classed as a worker if some or all of the following circumstances apply:

• They have a contract or other arrangement to personally undertake work or services for a reward, whether this be verbally or in writing, which may use words or phrases like “casual” or “as required’
• The business is not required to offer them work and they are not required to accept it, in other words, they only work when they want to
• The business is not required to offer them regular or guaranteed hours
• They are required to carry out the work themselves, ie; they cannot subcontract to someone else
• Having accepted work, their employer is usually in charge of how, when and where they work
• The business provides the tools, equipment, materials, facilities and uniform required to do that work
• The business deducts tax and national insurance out of their wages.

 

Need assistance?

 

Our employment law specialists offer advice and guidance to employers in relation to employment status and workplace rights. If you have a question about your obligations, or a specific workplace legal issue, contact us.

 

Employee or worker FAQs

 

What makes someone a worker?

A worker is generally someone who has a contract or agreement for work or services with a more casual or less structured arrangement such as irregular hours.

 

Who is called an employee?

Employees have the most generous employment rights. Employee status usually applies where the individual must do the work themself, the work is regular and cannot be refused and the employer has control over how the work is done.

 

What is the difference between an employee and a worker?

An employee has a more formal contract of employment and typically enjoys a wider range of rights, such as redundancy pay and protection against unfair dismissal. A worker has fewer rights but is still entitled to minimum wage, holiday pay, and protection against discrimination.

 

Why is it important to know if I’m an employee or a worker?

Your employment status determines your rights and responsibilities under UK law, including access to benefits like sick pay, holiday entitlement, and job security protections.

 

Can I challenge my employment status?

Yes, if you believe your employer has misclassified you, you can raise the issue with them directly or seek advice from an employment lawyer or Citizens Advice.

 

Are zero-hour contract workers considered employees or workers?

Zero-hour contract workers are usually classified as workers, but specific circumstances and contract terms can sometimes alter this classification.

 

What rights do both employees and workers share?

Both employees and workers are entitled to minimum wage, holiday pay, rest breaks, and protection against unlawful discrimination.

 

Does my employment status affect my tax obligations?

No, both employees and workers are required to pay taxes and National Insurance contributions, but your employer may handle these differently depending on your status.

 

How do I confirm my employment status?

Check your employment contract, or discuss your status with your employer. For disputes or uncertainties, take professional advice.