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Employee, worker or self-employed: Why does employment status matter?

11 October 2021

The distinction in employment law between the three categories of employee, worker and self-employed independent contractor is significant for a number of different reasons, including:

  • Employers and employees have obligations that are implied into the contract between them (for example, the mutual duty of trust and confidence).
  • Some core legal protections only apply to employees, most particularly the rights on termination of employment granted under the Employment Rights Act 1996 (ERA 1996) (the right not to be unfairly dismissed and the right to receive a statutory redundancy payment). However, workers are also covered by some important protections including in relation to working time and the minimum wage.
  • Only employees are covered by the Acas Code of Practice on Disciplinary and Grievance Procedures.
  • Only employees will be automatically transferred to any purchaser of their employer's business under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (although workers may also transfer depending on the facts).
  • The tax treatment of a person providing services depends on their status for tax purposes as determined by HMRC, using similar but not identical tests to the employment law tests. For tax purposes, the category of "worker" is not recognised.
  • An employer is vicariously liable for acts done by an employee in the course of their employment. This vicarious liability is unlikely to extend to independent contractors or self-employed individuals.
  • An employer is required to take out employer’s liability insurance to cover the risk of employees injuring themselves at work. Workers or independent contractors may not, in every case, be covered by this insurance and may want to consider entering into appropriate insurance for their own benefit.
  • Employers owe employees statutory duties relating to health and safety. These duties may not extend to self-employed independent contractors, but contractors will be covered under an organisation's common law duty of care in respect of occupier's liability.
  • Handling personal data under the retained EU law version of the General Data Protection Regulation ((EU) 2016/679) (UK GDPR) will have different implications depending on whether an individual is an employee, a worker or self-employed. Self-employed independent contractors may have specific processing obligations. The UK GDPR does not discuss what obligations "workers" have if they process personal data and it is not clear from ICO guidance whether they would be treated as an employee or a contractor for these purposes.

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excello law partners employment lawyers londonPartners Employment Lawyers is not a firm of solicitors. Members of Partners Employment Lawyers are consultants at Excello Law Limited and legal services are provided by Excello Law Limited which is authorised and regulated by the Solicitors Regulation Authority under SRA number 652733.