Legal definitions of ‘employee’ vary depending on the circumstances. For exa
mple, it is possible, in certain circumstances, for a person to be regarded as an employee for HM Revenue and Customs (HMRC) (i.e. tax and National Insurance) purposes, but as ‘self employed’ for other purposes.
The essential characteristics of the employment relationship are these.
- An irreducible obligation upon the worker to do work in return for benefits (financial and/or in kind);
- Mutual trust and confidence between employer and worker;
- Specific duties, and requirements concerning when and how they are to be fulfilled;
- Control of the work by the employer;
- The worker does not provide her/his own equipment;
- The worker is an integral part of the employer’s organisation and forms part of the employer’s administration;
- The worker must give personal service – i.e., cannot get someone else to do the work;
- The worker bears no degree of financial risk;
- The worker enjoys other benefits of employment, e.g. paid holidays, pension contributions, a sick pay scheme, etc.;
- ‘Overall reality’ - i.e. there is no single test. Although the courts may attach more weight to one factor over another or others, usually it is a mixture of factors that point to whether someone is an employee or self-employed.
Alternatives to ‘employment’ status
Self-employment
In the following circumstances someone may be either employed or self-employed, depending on the specific details of the particular case:
- working part-time or as a job sharer;
- temporary or casual working;
- working on a fixed-term contract;
- being already registered with HMRC, as self-employed.
As a broad generalisation, it is possible to apply the HMRC criteria as a basic rule of thumb – provided they are applied not to the person but to each particular set of work commitments. The HMRC criteria are that self-employed people:
- take risks with their own money in taking on the work – for example, they cannot demand extra payment if the work takes longer than originally planned; are able to engage others to do the work on their behalf;
- can decide where, when, and how the work is done (dependent on circumstances – for example, a self-employed bricklayer will not be able to decide where a wall is to be built, but may be able to decide whether the work is done on a Tuesday morning, a Thursday evening or a Saturday afternoon);
- have to put right unsatisfactory work in their own time and at their own expense; and provide their own equipment (although if, say, the contracting organisation has equipment for a specialist task, it would not necessarily be inappropriate for a contract to provide that such equipment should be made available to a self employed worker: a reasonably clear example might be in relation to window-cleaning on a multi-storey building which required equipment more sophisticated than extendable ladders. Both the self-employed worker’s and the contracting organisation’s positions would be established more securely if a reasonable charge were levied for this provision - while issues such as insurance might also arise).
Casual workers
Casual workers have no continuing contract of employment, but work for occasional hours, days, sessions or periods. There is no obligation upon the employer to provide further or additional work, and no obligation on the worker to accept it if it should be offered.
The term ‘casual’, however, is inherently ambiguous, and advice may be needed to determine the status of a particular arrangement (or, perhaps, lack of clear arrangement), and whether the person concerned should properly be regarded as self-employed or as an employee.
The normal arrangement is that, where a worker is provided by an agency, the worker’s contract is with the agency and the organisation with which the worker is placed will also have a contract with the agency. Neither of these contracts, usually, will be a contract of employment.
Meanwhile, considerable amounts of work provided over a lengthy period of time for the same worker through an agency may be regarded as conferring employment rights.
Joint contracts
Circumstances can arise in which a worker is employed jointly by two employers: an example would be a contract of employment involving work both for a charity and for its non-charitable trading company. This can have advantages - such as VAT benefits - for the employer(s); but difficult issues can arise in relation to the different obligations of and to the different employers. Advice and great care needs to be taken in drafting contracts for such workers.
Seconded workers
Seconded workers are placed by their employer to work, usually for a specified period of time, with another organisation. A common instance is that of a local authority employee seconded to work with a community organisation, perhaps as manager of a community building.
A written agreement should be made between employer, the host organisation and the worker, clarifying the arrangements for management of the worker and the work. The host organisation also has legal obligations not to discriminate against the worker on grounds of sex, marital status, race or disability.
Volunteers
Volunteers are, probably, in the most clearly defined of all categories. Even so, some organisations use volunteers in ways which require qualifications to be made – for example, where paid workers also do work for their employer on a voluntary basis.
Most straightforwardly, however, volunteers are people who give their time without obligation and receive no payment for their work for an organisation other than the reimbursement (or payment in advance – including the advance payment of tickets) of expenses necessarily and actually incurred in the performance of their work.
To find out more about volunteers, visit our volunteers and volunteering section here...
For more information
For more detail about employment, contracts, disciplinary procedures and to get sample job descriptions, why not download our information sheets below. If you would like to talk to someone within Community Matters about a specific question you have contact our advice service on 0845 847 4253 (020 7520 2789) from 09.30 to 13.00 on Mondays and Thursdays or submit an online enquiry here.
Online Guidance and Advice
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Specimen documents