Employees & Workers

Pay, Holiday, Tax, Pension Rights

- distinction between Employees, Workers, Self Employed

Affect pay, tax, pension, holiday the distinction between employees, workers, contractors ~rights to holiday pay, pension, depend on whether one is an employee, a worker, or in law  a contractor -self employed, freelancer. 

Legal definitions differ of employee and worker, of agency worker, contractor, sub contractor.  Definitions affect entitlements.

Many employees lose out on entitlements, because their legal employment category, or because who the law regards as employer, is different than they think or have been told.

When one is paid to do work for another it is important to know whether one is in law an employee or a worker or self employed contractor, as well as where one is an employee how the employment contract is formed.

Are tax, pension, your problem, or employer's..

your insurance, holodays, agency's, employer's?

Who is the 'employer' -the business one is working for or the employment agency, or a contractor?  Is one in law classed as a sub contractor, or a freelancer?   

These affect liability, vicarious (indirect) liability and the implied terms of any contract -as well as various statutory requirements ~from equal treatment to employment protection under labour law -many sued and lost because employer was not in law the sued but another.

Often these also affect 'pay' (in the USA and the UK and Europe defined in law as what is  received directly or indirectly in cash or kind for work done) ~an 'employee' gets full vacation (holiday) pay, paid leave -a  'worker' does not.

In employment sometimes there is company pension entitlement ~in some systems, e.g. Britain's, national insurance [unemployment, health-care,  state pension] and income tax are deductible at source and employer contributes if one is an 'employee,' but entitlement is partial if a 'worker', and nil if considered a 'contractor' -one's employment status matters.

The following helps ascertain one's employment status in law, and who in law is one's employer.

In legal classification there are three tests applied to decide whether one is in law an 'employee' or in the 'self employed contractor' category -basic considerations, while systems and procedures do vary, are similar:-

The first is a 'control test' and is based on this that if the employer controls the job to be done but not how it is done than the person doing the job is an employee; but this test would not be satisfactory, for an employee with specialist knowledge, e.g. a company nurse, too the employer would not tell how to do the job.

The second 'organisational, integration, test' seeks to ascertain whether the person paid is an integral part of the business: an anaesthetist was not a self-employed contractor in Cassidy -v- The Ministry of Pensions 1961 ~he was a resident of the hospital -an employee.

But this did not suffice: drivers paid for an agreed minimum number of jobs per year had to wear company uniforms have the company colours on their lorries and who could not work for the competition without permission, but could choose to do extra work and decided their own routes and used their own lorries and could use substitute drivers in Ready Mixed Concrete -v- The Ministry of Pensions 1968; they were self-employed contractors, not employees.

There is a third, the 'multiple test' to be applied: 'one is an employee if.. provides work or service for remuneration..  the business has some degree of control.. without any terms contrary to the employment relationship'

This is the consideration in the case of those engaged or introduced by recruitment agencies:-

Is one as a specific individual under the direct supervision and control of the business? If so, one is an employee of the client business -where one works...

Does the business where one works pay that agency and that agency itself pay one? If so, one is not an employee of the client business, but may be an employee of that agency itself  -an 'agency employee' (and in some systems, that agency is directly liable also for deductions at source -e.g., Finance Act, 1975).

Employees normally receive vacation pay, self employed contractors do not ~but what about the 'worker' -the casual worker who is not in self employment and yet is also not a regular employee? 

There is a different 'worker' category for casual workers which was created under the Employment Rights Act 1996 s.230 (3):

If a  casual worker is genuinely on an ad hoc basis employed, that casual worker is, in law, an employee while he is employed, and for the period/s of such employment has employment rights -e.g., to receive wages and vacation pay ~whether the employer a business or an agency.

A 'sub-contractor' normally would be in the category either of employee or of worker on the same basis, but instead of the business where the sub contractor works, of the self employed contractor who engaged the sub contractor.

If there is a dispute about whether a contractor engaged a subcontractor as a self employed person, then the same three tests above are applied to ascertain the employment status of that sub contractor in relation to that contractor.

If that sub contractor receives a wage and is not self employed in relation to that contractor, then if works regularly for that contractor is an employee of that contractor, and if works casually for that contractor is a worker of  that contractor.

Doing 'freelance work' is, to all intends and purposes, the same as being a self employed contractor.

One can lawfully be both: an employee or worker, as well as a free lancer -self employed.

If one normally an employee or worker wants also to do some freelance work, then one officially is an employee or worker and one's entitlement in relation to ones normal status are not affected -but do not extend to one's free lance employment.

If one normally self employed wants also to do some work as an employee or worker of a business, then one's official status as self employed does not change -one's entitlements as employee or worker are then only to the extent of one's such work.

If one is not paid for vacation.. if a pension scheme depends on whether free lance or not.. if employer is responsible colleagues' taxes or pension contributions but not one's own.. if one is working for one business but is paid by another… one might need to ascertain one's employment status -the above are the legal tests.   

Laws vary,  change -before entering into any disputes it is wise to first ascertain current law.

May be of interest -click...                  MAN WHO MADE PROUD