what is employment status and why does it matter?


The confusing issue of ‘employment status’ has been a hot topic in the gig economy over the last few years.  But what is it that you actually need to know, and what is all the fuss about?   

When someone is hired to do work, they could fall within one of three main categories:  

  • Employee
  • Worker
  • Self-employed consultant/contractor

The first thing to note is that the label you give your new hire will not really influence their status. There is a long list of factors that will decide their true status in law – and you cannot override this and agree between yourselves a status of your choosing. To make things more difficult, all these factors are weighed up and there is rarely an easy answer either way.  


Each category has its own legal framework and it’s important to know, when growing your business, what key rights your people have and what obligations you owe to them. Without this understanding, you cannot be sure you are treating your team fairly and you may be unwittingly creating legal risks. If you don’t know what legal rights are in play, you cannot know the consequences of your decisions and actions and when these can give rise to claims.  

For example, you need to know whether you ought to pay someone for holiday taken and whether, when terminating a contract, it could give rise to a Tribunal claim of unfair dismissal.  

At one end of the spectrum are employees, who have the most legal protection and rights, and you as their employer have the most duties and obligations. At the other end are self-employed consultants, who have very limited rights and the relationship is mainly governed by the contract. Somewhere in the middle, at an unspecified point dependent on a long list of factors, are workers. They are a hybrid between the other two categories and have some rights, but not as many as employees.   

Often, the distinction between employees and workers can be the most nuanced and difficult. The Labour party has in fact just announced that it would merge these two categories and create a single status of worker – which would certainly help to simplify things.

But there’s more to the story than just complex definitions and legal debate. Other areas of law and regulation interact directly with employment law and status, including tax, intellectual property rights and data protection and there are also insurance and health and safety implications to consider.   

We have focused on the key employment-related legal rights and have put together an ‘at a glance’ table explaining what these rights are and who is normally protected.

There are many, many more rights and types of claims relating to employment and workplace issues and there are also various eligibility requirements which we haven’t included here. This table is intended to give you a snapshot of some of the key and more common rights to be aware of. 

If you would like to discuss any of the issues raised in this article, click here.