27 Aug Determining the Employment Status of an Individual
There is a legal difference between a contract of employment (known as a ‘contract of service’) and a contract for service. A contract of employment applies to an employee-employer relationship. A contract for service applies in the case of an independent or self-employed contractor.
A worker’s employment status is not a matter of choice. It depends on the terms and conditions of the job. Generally, it is clear whether an individual is employed or self-employed. If it is not obvious, the checklists below will help in deciding this.
When looking at the criteria, you must consider the working conditions and the employment as a whole. The main question will always be whether they work ‘as a person in business’ or ‘on their own account’. This will help decide if the person is a free agent with economic independence from an employer.
While all of the following factors may not apply, an individual is normally your employee if:
☐ You control how, when and where the work is carried out
☐ They supply labour only
☐ You pay them a fixed hourly, weekly, or monthly wage
☐ They cannot sub-contract their work
☐ You supply the materials for the job
☐ You provide all equipment other than the small tools of the trade
☐ They are not exposed to personal financial risk in carrying out the work
☐ They do not assume any responsibility for investment and management in the business
☐ They cannot profit from the management, scheduling or performance of the work
☐ You set the work hours
☐ They carry out work for you or your business only
☐ You pay expenses to cover subsistence or travel
☐ They are entitled to extra pay or time off for overtime.
___ Total boxes ticked
While all of the following factors may not apply to the job, individuals are normally self-employed if they:
☐ Own their own business
☐ Are exposed to financial risk (for example they may have to bear the cost of redoing
faulty or substandard work carried out under the contract)
☐ Assume responsibility for investment and management in the business
☐ Can profit from the management, scheduling or performance of the work
☐ Have control over what, how, when and where the work is done and whether they do it
☐ Are free to hire other people, on their terms, to do the work which has been agreed on
☐ Can provide the same services to more than one person or business at the same time
☐ Provide the materials for the job
☐ Provide equipment and machinery necessary for the job
☐ Have a fixed place of business where materials or equipment can be stored
☐ Cost and agree a price for the job
☐ Provide their own insurance cover (for example, public liability cover)
☐ Control the hours of work in fulfilling the job obligations.
___ Total boxes ticked
Print off this document and tick the boxes where applicable on page 2 and 3. Total up the number of ticked boxes at the end of both checklists.
If you tick more of the ‘employee’ boxes (page 2) than ‘self-employed (page 3), then they are employees. Please keep this on file for your records.
If you tick more of the ‘self-employees’ boxes (page 3) than ‘employee’ (page 2), then they are self-employed. Please keep this on file for your records.