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| 1 minute read

Important new Government guidance on employment status

On 26 July 2022, the UK Government published Guidance aimed at summarising the distinction between the three types of employment status for employment law purposes - employee, worker and self-employed – and the statutory rights applicable to each status. The Guidance does not seek to change the law, but simply to summarise the legal position that has evolved through case law. Nonetheless, it will likely act as a useful reference point for employers.

In defining “worker” status, the Guidance stresses two key indicators: workers will often have working relationships with multiple (and sometimes competing) employers and will have a limited right of substitution to send someone else to provide services in their place. Self-employed workers on the other hand are defined as being able to send a substitute to provide services on their behalf without significant restrictions. The Guidance doesn’t delve further into other features of the working relationship that have been considered by the courts and tribunals in distinguishing between employee and worker status, such as the individual’s integration into the business, mutuality of obligation and the level of control exercised by the “employer”. Therefore, the Guidance should not be relied upon to provide an unequivocal determination of whether an individual would be deemed to be an employee, worker or self-employed contractor.

The Guidance stresses that it is the reality of the nature of the relationship, as opposed to simply what is written in the contract, that will determine which of the three categories an individual will fall into. This is nothing new and is simply a summary of the direction that case law has taken over recent years, particularly in the recent Supreme Court decision in Uber v Aslam 2021. This should act as a reminder to employers that they shouldn’t manipulate their written agreements to avoid recognising an individual’s statutory employment rights.

The Guidance specifically states that it does not apply to tax status and so a determination for employment law purposes will not necessarily translate to the same determination for tax purposes. It reiterates that there are just 2 categories of employment status for tax purposes - employed and self-employed – "worker" status is not a recognised concept for tax purposes. It is unhelpful for employers that the employment status and tax status tests will not be aligned and that there will continue to be a growing gulf between the two sets of rules, leading to particularly confusing outcomes for certain freelance and “gig” style working arrangements.

People with different employment statuses have different rights set out in law. The rights are designed to protect individuals. Most of the rights are compulsory, and normally can’t be signed away.


employment, tax