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Employment status

Employment Status

Is at the heart of both employment law and the tax system. It is the foundation of employment protections in the UK. Individuals and their employers have to know which employment status applies to their engagement to ensure the right protections are applied – from the National Minimum Wage and holiday pay and statutory rights, to unfair dismissal protection and redundancy.

Employment status also affects the taxes that an individual and the employer or  engager pay . It is essential that individuals and their employers or engagers  know what rates of tax and National Insurance contributions (NICs) are applicable to everyone in the organisation.

There are countless different working relationships that individuals and businesses can agree to. However, these relationships have to be translated into a limited number of categories for the purposes of assigning individuals rights and protections, and for determining the tax individuals and businesses should pay.

• Employment status is the working relationship between a person providing work and a person carrying out that work.

• It determines an individual’s entitlement to statutory employment rights and provides the employer with a set of responsibilities.

• It also determines the tax that applies to their income and will affect the amount of tax and NICs individuals and the businesses they work for pay.

It is not just what’s written in the contract; it is determined by the reality (working practices) of the agreement between employer and individual taking
account of all the circumstances, of which a written contract is one aspect.

An individual or employer cannot create a false employment status through a fictitious contract, which does not truly reflect the reality of the agreement between them. Whether a contract for work is permanent, zero hours, casual, or agency does not affect the general employment rights an individual is entitled to or the tax that is due, though it may give rise to additional employment rights specific to certain categories of worker.

If your business has concerns around the engagement of a contract workforce, please get in touch to book a free consultation.

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