This checklist explains the distinction between an employee, a worker and a self-employed contractor. It also highlights the legal status of volunteers.
An employee is an individual who has entered into or works under the terms of a contract of employment. The contract can be agreed expressly (in writing or orally), or implied by the nature of the relationship. To have employee status:
- An individual must be obliged to do the work personally (rather than sending a substitute).
- The employer is obliged to provide the work and the employee is obliged to accept it.
- The employer should have some control over the way the employee carries out the work.
Worker status is sometimes seen as a “half-way house” between employee and self-employed status. Workers are entitled to fewer statutory rights than employees, but do have some key legal rights, including:
- Protection from discrimination.
- Protection against unlawful deduction from wages.
- Entitlement to the national minimum wage.
The self-employed enjoy no statutory employment rights, although they may be protected by discrimination law.
What is the significance of the distinction?
Some core legal protections only apply to employees, for example the right:
- Not to be unfairly dismissed.
- To receive a statutory redundancy payment.
Health and safety
Employers owe employees statutory health and safety protection. Self-employed contractors may not be covered under these duties, although they will be covered under an employer’s occupier’s liability insurance.
Only employees will be transferred automatically to any purchaser of the employer’s business under a TUPE transfer.
An employer is responsible for deducting tax and national insurance at source (PAYE) from the salary paid to employees. Self-employed individuals are responsible for paying their own tax and national insurance under self-assessment.
An employer must take out employer’s liability insurance to cover the risk of employees injuring themselves at work. Self-employed contractors are unlikely to be covered by this type of insurance.
An employer is liable for acts done by an employee in the course of their employment. This type of liability is unlikely to extend to self-employed contractors.
Legal status of volunteers
The legal status of volunteers is not clear cut. There is a vast range in the types of relationships that exist, from the purely voluntary to those that are contractual. This ambiguity makes it difficult for organisations taking on volunteers to appreciate the legal obligations that may be owed.
Practical tips for reducing the risk of a legally binding contract
Organisations can reduce the risk of creating a legally binding contract with volunteers by:
- Avoiding making payments to volunteers that could be construed as wages. Payments to cover actual expenses should be identified clearly as such, and ideally reimbursed against receipts.
- Removing, or at least minimising, any perks that could be could be regarded as remuneration.
- Reducing obligations on the part of the volunteer (for example, give the volunteer the ability to refuse tasks and choose when to work).
- Avoiding using language that makes the arrangement sound contractual and adopting flexible language, such as “usual” and “suggested”.
- Treating volunteers fairly. Having clear procedures for dealing with problems and grievances should help reduce the likelihood of disputes with volunteers.
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For more information contact
Direct Dial Colchester: 01206 217 026
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Richard is an experienced advocate and is able to provide tribunal representation to clients. He advises on all aspects of employment law including redundancy programmes, severance contracts and policy drafting. He has a particular interest in discrimination law.
The content of this checklist is for general information only and does not constitute legal advice. It states the law as at February 2013. We recommend that professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this checklist.