How do we distinguish between a worker and an employee?Posted in : Seamus Says - Employment Law Discussion on 2 March 2018
Q: How do we distinguish between a worker and an employee?
Scott: The Taylor Report was out and, of course, there was the publication of the response to the Taylor Report consultation that was just done (here are the top 10 takeaways). This question here, “Please give a clear rule of thumb on distinguishing between a worker and an employee. We are still wrestling with this one and why does it matter so much, whether you define somebody as an employee or a worker?”
Seamus: I suppose it’s the issue that you walk into in any place of work. There could be a natural assumption that everyone there is an employee because maybe they’re all doing the same job. They are all acting in the same manner and there’s an assumption that they’re all employees. I suppose the big difference is there is a distinction in law between the employee and the worker. There are different rights that apply to each of those.
So, maybe if we look at the employee to start with, generally what you’ll be looking at with the employee is that there will be a contract of employment. That will be personal to the employee and that will set out what the terms and conditions are of the employment. It will set out the pay, the annual leave and the working hours and the things that are agreed between the employer and the employee.
This was an important point to flag up there is that although you’re required as an employer to provide a written contract of employment to your employees and certainly under article 33 of the Employment Rights Order in Northern Ireland here, you’re due to provide that within two months of the employment commencing. Just because there isn’t a written contract of employment doesn’t mean the person isn’t an employee or there’s not a contract there. You can have an express employment contract and then you have an implied one as well.
So, if I’m working for you, Scott, for a period of six months and I know what my terms and conditions are, those are not written down. I know that I come to work at 8:00 in the morning and I work to 6:00 in the evening because you’re a hard taskmaster. I’m aware of when my breaks are, what my holidays are, what I can and can’t do, where I have to be.
There’s still a contract there in place. What you’ll see with the employees are, they’ll have a lot of rights. We look back at the Employment Rights Northern Ireland order, it will set out those rights. So, there will be general things that all employees and workers are entitled to—the contract of employment, the pay slips, the national minimum wage, holiday entitlement, maternity/paternity.
Scott: All the Working Time Regulation stuff applies to this European term ‘worker’, the discrimination laws all apply to workers, unfair dismissal doesn’t. Redundancy, we were just chatting about it, it doesn’t apply to workers. It applies to employees. So, you wouldn’t get redundancy payments for workers. So, you have this situation where a full employee, you know what it looks like.
It’s like most of us, whether there are written terms or not, we still have a contract. We still have to turn up. There are obligations on us to turn up. There are obligations on the employer to pay us. That happens with workers too. The difference is that I suppose some workers may not have the mutuality of that obligation and the employer may not have to give them the work all the time.
Scott: Or they may have the right to refuse every once in a while.
Seamus: Yeah. That’s really what it comes down to, where we’re looking at the differences. If you’re looking at the rule of thumb, I know you can go to HMRC website and you can do the test to decide whether you’re an employee or a worker.
Q: And what about self-employed contractors?
Seamus: Yes, self-employed contractors. Nine times out of ten, I think no matter what information you put in there, it will come out and say you’re an employee. So, it’s a test that you can’t think, just have a ticked box exercise. Do you really need to look down and see what the terms are of the engagement?
The difference really comes down to the three elements of the contract, one is mutuality of the obligation and the second is control. The mutuality of obligation or success for the employer undertakes a person working and that person agrees to do the work in turn for their salary or for their wage. They do it on the terms laid down by the employer. The control element exists where the employer decides the when, where and how the work is done or the matter in which it’s to be done in.
Different for the temporary worker or for the worker, they are not employees if they’re free without any penalty, without any potential disciplinaries, to accept or reject any off of employment made to them. The control element, that only works or is there whenever the worker is in place because whenever they’re doing the work, they’re working under the control of the employer. They’re doing what the employer tells them to do. It’s the ability to reject an offer at will without any penalty which distinguishes the worker from the employee.
Really, what it comes down to is that element of being able to say, “Thanks, but no thanks,” where the employee doesn’t have that choice, the employee knows that it’s Monday to Friday and that’s the working hours. If they don’t attend, then they’re in breach of their contract. Where the employee or the worker has the ability to say, “No, I don’t want to work that day,” and there’s no penalty there that can be given.
Scott: And a self-employed contractor is somebody who’s really out on business for themselves and they do their own tax, national insurance or whatever. They might not even pay national insurance, but they do their own tax returns and write certain things off against tax. They have their own tools. They have their own equipment. They would tender for work, perhaps, to make it clear. A worker is that kind of hybrid. It’s in between self-employed and employed. Because it’s in between, they can’t be one thing or the other.
Dependent on where they are, they get more rights or fewer rights just depending on what the jurisdiction is. But the difficulty is until the law changes - as I remember it, there’s something in the ’96 Order that allows the Secretary of State, I think, when it was first written, but it allows the minister, if you like, to determine that you shouldn’t have this category of worker. They can actually transform them all and turn them all into employees. It was never enacted.
Seamus: I think that frustrates people. Certainly, examples of the worker that we can give include the casual worker, the agency worker, the zero hours contractor, which is always the big controversial area.
Scott: Huge cases at the moment—Pimlico Plumbers was there [at the Supreme Court]. We’ve got all the Uber cases, Deliveroo, all those things have gone through because the argument is they’re so-called self-employed, but they’re much closer to this worker, this hybrid than they are—they’re clearly not full employees, most of them, but because they’re workers, they’re looking for holidays and time off and breaks and all the kinds of things that . . .
Seamus: Exactly. And they were going for equal treatment.
Scott: Equality of treatment effectively as a worker. It means that if they’re self-employed, they don’t get those things.
Seamus: No. There’s a clear distinction there. I think we can all point to the self-employed plumber that we bring into our home and does some work in terms of that. We know that they’re not our employee whenever they come into that.
Scott: They’re not a worker either. They just happen to be there to do some work.
Seamus: They have a choice if they want to stay or go. We don’t worry about any aspects of tax for them or making deductions from any moneys. It’s all over to them in terms of that. But it comes down to that aspect of being able to say yes or no to the work essentially is what it is, what you’re looking at.
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