Different kinds of employment status

Most working people in the UK are classed as employees and work under an employment contract. The contract sets out the benefits and duties of the ‘employee’ and the ‘employer’.

Employees have access to a wide range of in-work benefits including:

• Statutory Sick Pay
• holiday pay
• Statutory Maternity, Paternity and Adoption Leave and Pay
• Statutory Redundancy Pay.

Employees are paid on a Pay As You Earn (PAYE) basis. This means tax and National Insurance contributions are usually automatically deducted.

You’re entitled to be paid at least the National Minimum Wage or National Living Wage. These rates vary depending on your age and if you’re an apprentice.

Worker status is similar to being an employee, but on a more casual basis.

As a worker, you’re entitled to some statutory rights – including the National Minimum Wage and paid holiday. You don’t usually qualify for redundancy pay or minimum notice periods.

Access to statutory sick, maternity, paternity and adoption pay, as well as shared parental leave, varies depending on your employer.

Agency workers have a contract with an employment or recruitment business, then hired out to work for the agency’s clients. This is usually on a temporary basis. However, your employment status can vary.

Most are classified as workers, with some employment rights – such as the National Minimum Wage and paid holiday.

You can also be self-employed and work through an agency, often called a contractor.

You won’t have any employment rights, but you will have fewer obligations to the agency. For example, you’ll usually be able to send someone else in your place.

Less common are agency employees – who are on what’s called a ‘pay between assignments’ contract. Agency workers usually only get paid when they’re on assignment. But agency employees continue to get paid, even when they’re not working.

Agency employees have full employment rights, but often have more obligations to the agency. For example, it’s harder for them to turn down work and they might have to work a minimum number of hours each week.

If you signed up with an entertainment or modelling agency, the rules are slightly different. Agencies can charge fees for finding you work, but this depends on the kind of work you’re looking for.

• you run the business and are responsible for its success or failure
  
• you’re able to send someone else to do the work for you
• you set the price for the work and can decide how and when the work is done
• you use your own money to buy business assets and cover running costs
• you’re responsible for fixing unsatisfactory work in your own time
• you can work for more than one client at once.

You’ll be responsible for paying your own tax and National Insurance contributions. So you will need to register as self-employed and fill in a Self Assessment tax return.

As you work for yourself, you have no legal right to employment benefits. However, you’re covered under certain health and safety legislation. And, in some cases, you’re protected against discrimination.

Independent contractors are self-employed, and usually provide highly skilled work to clients on an ‘as needed’ basis.

As you’re self-employed, you’ll need to register with HMRC to pay your own tax and National Insurance.

This largely depends on who you’re working for and the contract you’ve agreed.

Independent contractors will often be classified as workers and have basic employment rights. This is usually if you’re on a three-month contract, or longer.

You’ll be covered under health and safety legislation. This is because the person employing you is responsible for maintaining a suitable working environment.

If you’re a subcontractor in the construction industry, it’s a good idea to enrol in the Construction Industry Scheme (CIS).

If you do, the contractor employing you will make tax and National Insurance contribution payments HMRC. This is similar to being paid on a PAYE (Pay As You Earn) basis.

You’ll still need to complete a Self Assessment tax return and pay tax on your income. But what’s been paid by the contractor will be deducted from what you owe.

This is similar to a being contractor in that you’re contracted on an ‘as needed’ basis.

The main difference being freelancers generally don’t commit to working for the same company for long periods of time. Instead, they can work for various companies simultaneously.

Some examples of freelance workers include writers, journalists, graphic designers, video editors and photographers.

You’re classified as self-employed for tax purposes, but work for other people, rather than for yourself.

You’ll need to register for Self Assessment and submit a tax return each year.

As you’re self-employed, your rights are limited. But you do have some rights under health and safety, and discrimination legislation.

You should be paid by PAYE, so you won’t need to register for Self Assessment to declare your income from zero hours contracts. However, as a self-employed person, you can agree to work on a zero hours basis and pay your tax through Self Assessment.

If you’re on a zero-hours contract, you’ll probably be classified as a ‘worker’. You’ll be entitled to basic employment rights, including the National Minimum or Living Wage and annual leave.

More rarely, you’ll be classified as an ‘employee’ and have access to full employment rights.

If you meet certain requirements, you might also be entitled to enrol in a workplace pension.

If you work in the gig economy, you’ll usually use an intermediary, such as an app or a website. This acts as a go-between – linking workers with customers.

Workers usually pay a charge to use the service. This is typically 10 or 15% of what they earn from the work.

Gig economy platforms include:

• ride hailing company Uber
• food delivery company Deliveroo
• courier Yodel.

The work is flexible, in that you can choose the hours you work and there’s nothing forcing you to work certain times.

At the moment, many people in the gig economy are classed as self-employed and will submit a Self Assessment tax return.

However, there have been many high-profile court cases recently challenging this classification. Some companies now class people operating on a gig economy basis as workers, which includes access to certain in-work benefits. But this doesn’t apply to all work in the gig economy and many of these rulings are under appeal.

As you’re technically self-employed, you have very limited employment rights. However, there are many high-profile court cases involving large gig economy platforms challenging the idea that workers are self-employed.

Apprenticeships are a way of gaining first-hand work experience and a qualification, while earning a salary. They take one to five years to complete and are open to anyone over the age of 16, who isn’t enrolled in full-time education.

If you’re under 19 or in the first year of an apprenticeship, you’re entitled to the minimum wage of £6.40 per hour (for 2024/25). This goes up if you’re over 19 and have completed your first year to either the National Minimum Wage or National Living Wage rate for your age.

If you’re an apprentice working more than 33 hours a week, you’re entitled to the same benefits as any other full-time employee. This includes sick pay, annual leave and maternity and paternity pay.