Employment Status - Employed or Self-Employed?

Most of the time, it is easy to distinguish whether an individual is employed or self-employed, however an individual's employment status may not always be obvious. Here is our expert guide to help you define employed and self-employed workers.

For example, a beautician hired by a spa is known to be an employee as they received their employment through an interview process with an organisation, they work for wages or a salary which is provided by the organisation, and they have recognised duties which are usually advised by an employee in a more senior position.

By contrast, a beautician who works from their own home or travels to their customers’ homes to carry out their duties is known to be self-employed as they earn their income through conducting profitable operations from a trade that they operate directly.

The Code of Practice for Determining Employment or Self-Employment Status of Individuals states that the job as a whole needs to be considered, for example, what are the working conditions and what is the reality of the relationship?

Common criteria for those who are employees:

• Supplies labour only.
• Works set hours or a given number hours in a week or a month.
• Is entitled to extra pay or time off for overtime.
• Works for one person or one business.
• Is not exposed to a financial risk from carrying out their duties.

Common criteria for those who are self-employed:

• Is responsible for the management of, and investment in, the organisation.
• Has control over what work is done, when and where it is done, and whether or not they are going to carry out the work personally.
• Could be exposed to a financial risk from carrying out their duties as they are responsible for the cost of supplies needed to carry out the work.

However, it may not always be clear if an individual is employed or self-employed and this can ultimately lead to misconceptions in relation to an individuals’ employment status. At times there are additional factors that need to be considered.

For example, an employee with specialist knowledge in their area of employment will not always be directed by senior members of staff as to how the work should be carried out. An Unfair Dismissal case earlier this year was taken against a healthcare provider by a teacher who provided art lessons twice a week on the premises to those with mental health difficulties.

The teacher had his employment terminated after it came to light that he had been having an inappropriate relationship with a service user. The teacher claimed he had not been given a fair disciplinary procedure as he had heard from another colleague that he was going to lose his job.

The normal disciplinary procedure was not carried out by the healthcare provider, who did not feel that he was an employee as he was allowed to organise his own working days and there was no mutuality of obligation between the parties.

However, it was found that the employee received a set wage and did not provide materials for himself or the participants of the class, was not permitted to subcontract the work and worked set hours every week.

The decision was made by the courts that the teacher was, in fact, an employee and because the normal disciplinary procedure was not carried out, the courts decided that it fell within the jurisdiction of the Unfair Dismissals Act.