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Hiring & Recruitment: What are the different types of employees?

Types of Worker

UK law distinguishes between “employees”, “workers” and the “self-employed”. The protection that is given under UK law depends on the nature of the relationship. You should be confident in your classification of each team member so as to understand your obligations and the associated risks.

  • Employees” have the most comprehensive protection with the benefit of rights such as the right not to be unfairly dismissed (subject to the necessary length of service), the right to a redundancy payment, the right to a statutory minimum period of notice of the termination of the employment, the right to take maternity/paternity/parental/adoption leave and the right to request flexible working.
  • Workers“, as a separately identifiable category of staff, is a concept almost unique to the UK and represents something of a hybrid between an employee and a self-employed contractor. The term is typically used to describe individuals who enter into contracts to perform work personally for an ’employing party’, but that employer is not by virtue of the contract a client or customer of the individual. The distinction is not always easy to draw. Such workers enjoy certain statutory protections but these are less extensive than those conferred on employees.
  • Truly “self-employed” individuals do not enjoy any employment rights and should be responsible for their own business affairs, including taxation. However, case law in this area has significantly increased the risk that individuals working personally will be considered workers. Misclassification of status is a real risk for companies (see further below).

 

 

Contractors (non-employees)

You should take particular care when engaging individual contractors (also commonly known as consultants) to ensure the nature of relationship justifies the name given to it.

Key features to be considered when evaluating employment status include, but are not limited to:

  • Personal service (i.e. whether a specified individual is expected to undertake the services or a substitute can be deployed);
  • Mutuality of obligation (i.e. whether the hirer obliged to provide work and the individual is obliged to accept work); and
  • Control (i.e. the extent to which the individual may determine their own method of working).

The greater the level of personal service, mutuality of obligation and control, the greater the prospect an individual will be considered an employee or worker, irrespective of the label given and the terms of any agreement.

Fixed Term & Part Time Employees

Employees may be engaged on definite/fixed-term contracts and/or on part-time hours. However, such employees have the right not to be treated less favourably than comparable permanent or full-time employees in relation to the terms of their contract or by being subjected to any other detriment. Employers may only treat fixed-term employees or part-time workers less favourably where such treatment can be objectively justified.

Fixed-term employees will be deemed to be permanent employees if they have been employed under successive fixed-term contracts for four or more years, unless the use of another fixed-term contract can be objectively justified by the employer. Moreover, non-renewal of a fixed-term employment contract will constitute a dismissal by the employer for the purposes of UK employment law and the rules on termination should be considered.