Deciding someone’s employment status can be complicated and Employment Tribunals and H.M. Revenue & Customs (which includes the Inland Revenue) may consider different factors when deciding what status you have, as there is no single legal definition. It cannot be an employee’s or an employer’s decision what status an employee is – this can only be finally resolved by a Tribunal if there is a dispute.

There are three different types of working individuals:

• an Employee
• a Worker (someone who works on a e.g. casual basis or is an agency temp)
• or someone who is self-employed/ freelance.

It is important to establish your status, as:

• Employees generally have more employment rights than Workers or those who are Self-Employed
• and there is also a difference in National Insurance contributions and tax between Employees/Workers and those who are Self-Employed.

It is therefore equally important for Employers to know the correct status of those you employ.

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An Employee

There is presently no single legal test to determine if you are an employee or a worker, but you are likely to be an Employee (whether on a Permanent (open-ended) contract or on a Fixed-Term contract) if:

• Your Employer provides the work, any tools and equipment for it, and they decide how and when you do the work.
• You will usually have a written contract (although a verbal contract will count)
• You are expected to do the work yourself that you are employed to do, and may be moved to a different tasks
• You are paid a regular amount according to the hours you work (through the Pay as You Earn (PAYE) system), and you have to work a set amount of hours. You may get extra pay for overtime and bonuses.

If you are an Employee your contract is called a ‘contract of service’.

NB: There is now a provision in law where someone employed on a Fixed-Term contract can receive a permanent (open-ended) contract if:

• You have been continuously employed (i.e. no significant breaks) by the same employer a on a fixed-term contract for four years or more that started after 10th July 2002 (unless your Employer has changed this time limit by a ‘workforce’ or ‘collective’ agreement).
• If this is the case you can ask your employer for a statement confirming that you are now permanent and no longer employed on a Fixed Term contract
• Your employer can only keep you on a Fixed Term contract after 4 years if they could objectively justify this at the point your Fixed Term contract was last renewed
• If your employer fails to give you this statement (when you have requested it) or gives you a statement of reasons why you must remain on a Fixed Term contract that you do not agree with, you can make a claim to an Employment Tribunal.

For more information about Fixed Term contracts click here

A Worker

This is broader category than an ‘employee’, introduced by European Union legislation, which usually excludes those who are self-employed. A worker is anyone who works for an employer (with or without a contract of employment), and performs the work personally.

Workers are usually:

• Agency workers (‘temps’) – the Agency who finds you work pays your wages, and the Company who hires you pays a fee to the Agency for your work.  For more information on working out if you are an Agency worker click here
• short-term Casual Workers (often with a written contract and usually paid via PAYE, with tax and national insurance contributions deducted; Casual Workers are not usually part of the permanent workforce but supply their services on an irregular or flexible basis).  For more information on working out if you are a Casual workers click here
• some Freelancers (there are occasions when those who are self-employed for tax purposes may be classified as ‘workers’ for employment rights purposes).

Before 2011 the Government will introduce the Temporary Agency Workers Directive which gives agency workers the right to equal treatment (with permanent staff working at the same organisation) after 12 weeks in a given job.

Self-Employed (Freelance)

You are likely to be self-employed if:

• You determine how and when you do the work within reason
• You can hire helpers or replacements for you if you are unable to do the work (for whatever reason)
• You pay your own tax and national insurance contributions on a self-employed basis (you complete a Self Assessment tax return)
• You are contracted to provide services to the Employer over a certain period of time for an agreed fee
• You run your own business and take financial responsibility if it is successful or not, and provide the main items of equipment. You may work on your own premises.You may have several customers (employers) at one time.

If you are self-employed your contract is called a ‘contract for service’.

If you are freelance, have you considered becoming a Limited Company?

There are many advantages in doing this, both financially and for marketing purposes, but also there are disadvantages with a higher administrative burden. There are organisations that can help you take care of the tax and administration burden – Have a look at the Crunch website that gives you a simple way to create and manage invoices, expenses, payments and tax returns, leaving you to concentrate on your areas of expertise.

There is no one single thing that completely determines your employment status:

An Employment Tribunal will make a decision based on all the circumstances of the case if there is a dispute between you and your Employer about it. There are four main categories they look at:

• Control. Do you have the final say in how your business is run?; Can you choose whether to do the work yourself or can you send someone else to do it? Can you choose when and how you work?
• Integration. Are you responsible for hiring other people and setting their terms of employment if you need help? Are you excluded from your Employer’s internal organisational matters, corporate training, staff meetings? Are you exempt from having action taken against you using the company’s disciplinary procedures and have no access to their grievance procedures? Are you excluded from company benefits and perks?
• Mutuality of Obligations. Does the Employer offer work to you only if and when it is available? Can you decide when you will work and can you turn the work down that is offered?
• Economic Reality. Are you responsible for meeting the losses of your employment as well as taking the profits? Are you responsible for correcting unsatisfactory work at your own expense? Do you have to submit an invoice to the company for them to pay you? Do you get a fixed payment for the job (including labour and tools/materials)? Do you provide the main items of equipment needed to do the job? Do you work for a range of different employers?

If you answer:

• YES to these questions then it is more likely that you are self-employed.
• NO to most of these questions then you are likely to be an employee.
• YES to some (specifically that you can decide when you will work and can accept work or turn it down; that your employer will only offer work when it is available) but you are NOT in business on your own account then it is likely you would be considered a Worker.
• These questions are a summary for guidance only – you should get advice from an expert if you are unsure.

Unsure?:

• You can of course be employed and self-employed at the same time (you may be an employee during the day and run your own business in the evening; or take a freelance contract with one employer and your next contract is on a PAYE basis). You may also not be self-employed for every job – each job needs to be considered separately.

• In the Film and TV Industry there are many people working who find it difficult to determine their status. HM Customs and Revenue issue detailed criteria to help determine whether you are Employees or Self-Employed – http://www.hmrc.gov.uk/employment-status/index.htmf

• and have a specific guidance list for the film and TV Industry, specifying which jobs are allowed to have Self-Employed status http://www.hmrc.gov.uk/specialist/figuidancenotes2003.pdf

• There are also occasions when, in the Film and TV Industry, you will do a job that is not on the recognised Inland Revenue list (above) but the I.R., if you contact them, may class you as self-employed and give you a letter of authority. The above link (guidance notes) give details of how to do this and the letter of authority must be given to your employer.

• If your Employer is keen that you should be freelance, but you don’t think you can be, you must tell your employer this and they should not insist that you are self-employed. If the matter was taken to Court by the HRMC, a UK Court in this instance, if you genuinely cannot be classed as self-employed as your employment looks like it has employee status, will ignore the decision that you are self-employed and your contract would have no legal bearing.

• For a Guide to How to Start Freelancing click here – the pitfalls, perils, benefits and bonuses and if you are thinking of working for yourself then this Guide explains the basics of Tax – click here

Click here for information on your Employment Rights as an Employee, Worker or Self-Employed

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If you work in the UK Media Industries and have a question about this or any other topic, please e-mail us at workline@freelanceadvisor.co.uk.

If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to us at The HR Kiosk (click here) - a Human Resources Consultancy for small businesses – you can retain us for as much time as you need.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.