Employment Status

What do you understand about the employment status?

In the UK, ‘employment status’ determines an individual’s statutory rights and protections attributable to employment law (Brown et al., 2018). The three recognised statuses, without prefacing further categories of complexity, are: 1) ‘employee’, those on an organisation’s payroll who have a ‘contract of employment’, sometimes referred to as a ‘contract of service’, 2) ‘self-employed’, or ‘independent contractor’, those who invoice an employer about a ‘contract for services’ rendered, and 3) ‘worker’, a grey area for those who periodically work for an employer and are paid through a subsidiary (i.e., an agency) without a contract of employment (i.e., for service) (Taylor & Emir, 2019).

One interpretive difference between the three recognised statuses is the remunerated relationship and ‘contract of/for service’ individuals have with an employer (Brown et al., 2018). Another contrast follows that different statutory rights and protections are attributed to individuals according to what employment law compels employers for each status. For instance, all statuses are protected from discrimination by an employer and, if violated, are enforced at court or employment tribunal (Taylor & Emir, 2019). However, statutory sick pay (SSP) is only payable to those considered employees, partly due to higher national insurance contributions.

Describe the tests of employment.

In the UK, ‘tests of employment’ are frameworks County Courts and Employment Appeal Tribunals use to determine an individual’s employment status as a) employee, b) self-employed, or c) worker. The tests develop evolutionarily in response to dispute resolution cases involving employers and individuals (Taylor & Emir, 2019). These disputes are multivariable and are nominally characterised by a violation of employment law in matters such as pay, rights, and employment protections.

The ‘tests’ are applied concerning the doctrine of precedent in common law. That is, the outcomes of prior cases inform future thinking on similar or new issues (Bogg & Ford, 2019). The courts and tribunals emphasise the wording of relevant statutes and the intention of Parliament when it passes applicable laws or regulations, such as the National Minimum Wage Act 1998 (Bogg & Ford, 2019).

Significantly, it should be noted that no singular ‘test’ is determinative as a combination is preferential in determining employment status and resolving disputes. There are currently four ‘tests’ practised: 1) ‘The Control Test’, the degree of control an employer has over an individual, 2) ‘The Economic Reality Test’, the economic reality of the relationship between the employer and the individual, 3) ‘The Mutuality of Obligation Test’, does the employer must offer work and for the individual to accept it, and 4) ‘The Integration Test’, how involved is an individual in the employer’s affairs, i.e., does the individual make use of the employer’s resources (Taylor & Emir, 2019).

Addendum

SSP is a benefit of 'employee' status and is not contingent on individuals paying higher NICs. There is a broader point to how NICs differ between the statuses. This would be about the non-parity of NIC rates, i.e., Class 1, Class 2, and Class 4. Wherein, Class 1 ('employee'), according to the 2022/2023 rates, pays more than Class 2 and Class 4 ('self-employed'). Although NIC rates are under constant review and subject to change, generally, NIC rates are higher for Class 1 individuals ('employees') when compared to Class 2 and Class 4.