Am i self-employed? And what is my employment status?
Am i self-employed? Many people are clearly self-employed or employed, but others are more difficult to find out about their employment status.
There are actually five main types of employment status. Here’s our guide to the different types and how to find out which applies to you.
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Am I self-employed or employed?
If you don’t exactly fit into either category it can be hard to tell. Maybe you have more than one job. Or you are a freelancer, but more as a long-term contractor for the same company than as a sole proprietorship with your own small business.
Whether you are self-employed or employed, this guide is designed to go through the importance of your employment status. According to gov.uk there are five “main types of employment status” so this guide should help you figure out where you fit.
There you will find further information on your rights and benefit entitlements. For example, if you are a technician, your employer has certain obligations that he must fulfill.
1. What is an employee?
Gov.uk defines an employee as “someone who works under an employment contract”. This is a bit vague, however, as contractors and other types of self-employed often have a contract with the client they work for.
The easiest way to find out if you are an employee is to answer the following questions. If the answer is yes to most of them, then you are likely an employee:
|Are you an employee?|
|Are you obliged to work regularly (unless you are on leave, including vacation, sick leave or maternity leave)?|
|Do you have to complete a minimum number of hours? And do you expect to be paid for the hours you work?|
|Do you work on the company’s premises or at an address provided by the company?|
|Can only you do the role (e.g., can’t send another person to do your job)?|
|Does the company deduct taxes and social security contributions from your wages?|
|Do you get paid vacation?|
|Are you entitled to contractual or statutory sick pay and maternity or paternity benefit?|
|Can you join the company’s company pension scheme?|
|Do the company’s disciplinary and complaints procedures apply to you?|
|Does your contract include dismissal procedures?|
|Does the company provide you with materials, tools and equipment for your work?|
|Is this the only business you work for? And if you have another job, is it completely different from your work in this business (e.g. as a receptionist, but also as a zookeeper on weekends)?|
|Does your contract, general terms and conditions or letter of offer use terms such as “employer” or “employee”?|
Am i an employee? Check other things
You may be an employee but have a different status in the company for tax reasons. If you are not sure, ask your employer to go over this with you.
If your employment status is incorrectly determined, you and your employer may have to pay outstanding taxes and other penalties, or you may lose your entitlement to benefits. It is worth checking that everything is OK.
Employees can also be Employee shareholders.
2. Independent meaning (including contractor)
Again, we start with a gov.uk definition. You are self-employed if you manage your company independently and take “responsibility for success or failure”.
Another clue is how you make money for your job. If you are self-employed, you will not be paid through employee pay-as-you-earn (PAYE). And you are not entitled to the rights and obligations that apply to employees.
To find out if you have self-employed (or contractor) status, ask yourself the following questions. If most of them say yes, you are likely self-employed:
|Are you independent?|
|Are you in the business yourself? This means that you are responsible for success or failure, making a profit or a loss.|
|Are you free to choose what to do? And when, where and how do you do it?|
|Could you get someone else to do the work if you wanted to?|
|If there was a problem with your work, would you be responsible for fixing it in your spare time?|
|Do you and the employer agree on a fixed price for your work, regardless of how long the work lasts?|
|Are you using your own money or financing to buy what is needed to run the business and supply the employer?|
|Are you free to work for more than one client?|
|Are you exempt from PAYE?|
The following questions relate to your labor rights. You are likely to be self-employed and have no employee rights if you answered yes to most of these questions:
Are you making bids or making offers to get work?
do you tend to supervise yourself at work?
Are you responsible for paying your own social security contributions and taxes?
Do you work under a contract (often referred to as a “service contract” or “consulting contract”) that uses terms such as “self-employed” or “independent contractor”?
What is the difference between “contractor” and “self-employed”?
A self-employed person is someone who works for himself, not as an employee. From hairdressers to market stall vendors, they offer customers and customers services and products, usually at an agreed or announced price.
Contractors can also be self-employed but perform tasks on a contractual basis rather than selling products or rolling, bookable services. For example, a plumber would work for a customer under an agreed, one-time contract. You could repeat it, but as a different contract. A market stall vendor, on the other hand, is not tasked with selling you bananas.
A contractor can be Self-employed, employed or a Workers (see below), depending on whether you work for an agency or not.
For contractors in the construction industry, see the Construction Industry Scheme (CIS) to find out about your HMRC status.
Self-employed, but working for an employer
It is possible to be employed and self-employed at the same time, for example the person who works as a receptionist during the week and runs an animal care company at the weekend.
If this sounds like you, make sure that your day employer has correctly submitted your employment status and that you are aware of your responsibilities for the self-employment you do on the side.
Find out about your part-time tax obligations and how you can achieve a good work-life balance.
Are there labor rights for the self-employed?
Your labor rights and their differences for you as a self-employed person are another important aspect. Being your own boss means that labor law does not offer complete protection, but your health and safety are still protected and sometimes you are protected from discrimination. Review your customer contracts and mark what has been agreed so that you are fully informed.
Finally, once you have started your own business, it is very important that you Let HMRC know. Any changes in your employment status should be reported to HMRC, so double-check that all of your records are correct.
3. What is a worker?
If you answered yes to most of these questions, then it is likely that you are a worker. Check your contract or ask your employer if you are not sure:
|Are you a worker?|
|Do you have a contract or a “reward” agreement (see below)? This can be done in writing or orally.|
|Is the reward cash or a contribution in kind (e.g. promise of a contract or future job, perk, or loan)?|
|Do you have a limited right to subcontract the work?|
|Do you have to report to work even if you don’t want to?|
|Does your employer have to work for you while the contract or agreement is in effect?|
|Are you doing the work outside of the formation of a limited liability company (e.g. an arrangement where you run your own limited company and the “employer” is a customer)?|
If most of these apply to you, then as an employee you are entitled to certain labor rights such as statutory vacation and national minimum wage protection. It is therefore important to be clear about your status and to clarify with your employer if you think something is wrong.
Occasional or irregular employees
This is a special form of employment and is usually used when someone works occasionally for a company, but that company is not obliged to offer them a job. The employee is also not obliged to accept work. Such a contract uses words such as “casual”, “zero hours” or “as needed”.
In order to be able to work, you must sign your employer’s terms and conditions, even if it is only done orally, and you are under some kind of supervision. Unlike some manual workers, you might not be able to subcontract this type of casual work. However, the company should deduct taxes and social security contributions from your wages and provide the necessary tools or equipment.
If you are a company director, you run a limited liability company on behalf of the shareholders. You may still have an employment contract – it depends on the type of work you do for this company.
Directors have specific rights and duties. They are classified as “office holders” for tax and social security calculations.
If you are a business leader you can still have an employment contract and certain rights. If you are unsure what these are, seek legal advice or contact HMRC to verify.
Somewhat more unusual are incumbents, who are defined by gov.uk as people who “have been appointed to a position by a company or organization but do not have a contract or receive regular payments”. This can include company secretaries, club treasurers, trustees, clergymen, and many others.
Further information can be found in the Official Page on gov.uk.
It is worth noting that although office holders are different from employees, self-employed and employees, they can still have an employment contract.
These were developed by gov.uk to check your status for tax purposes. You can use them for a quick check of employment status.
For more information and a definition of employment status
Acas is a great resource for inquiring about employment status in England, Wales and Scotland. If you have any questions about employment law in Northern Ireland, please contact the Labor Relations Agency.
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