Employment status

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Employee

An employee is someone who works under an employment contract.

A person may be an employee in employment law but have a different status for tax purposes. Employers must work out each worker’s status in both employment law and tax law.

If someone is classed as an employee for tax purposes, their employer must tell HM Revenue and Customs (HMRC) when the person starts being an employee or stops being an employee.

Employment rights

All employees are workers, but an employee has extra employment rights and responsibilities that do not apply to workers who are not employees.

These rights include all of the rights workers have and:

Some of these rights require a minimum length of continuous employment before an employee qualifies for them. An employment contract may state how long this qualification period is.

Working out employment status for an employee

Someone who works for a business is probably an employee if most of the following are true:

  • they’re required to work regularly unless they’re on leave, for example they’re on holiday or on sick leave or on maternity leave
  • they’re required to do a minimum number of hours and expect to be paid for time worked
  • a manager or supervisor is responsible for their workload, saying when a piece of work should be finished and how it should be done
  • they cannot send someone else to do their work
  • they get paid holiday
  • they’re entitled to contractual or Statutory Sick Pay and to maternity pay or to paternity pay
  • they can join the business’s pension scheme
  • the business’s disciplinary and grievance procedures apply to them
  • they work at the business’s premises or at an address specified by the business
  • their contract sets out redundancy procedures
  • the business provides the materials, tools and equipment for their work
  • they only work for the business or if they do have another job, it’s completely different from their work for the business
  • their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’

If most of these do not apply, you should work out if the person is self-employed.

Individuals and their employers may have to pay unpaid tax and penalties, or lose entitlement to benefits, if their employment status is wrong.

Check employment status for tax purposes

For tax purposes, you can check someone’s employment status online to see if a worker should be classed as employed or self-employed.

View a printable version of the whole guide

Part of Get your business ready to employ staff: step by step

  1. Step 1 Decide what type of employee you need

    1. Check whether you need full time or part time staff
    2. Check the different types of employment status

  2. and Check you can afford to take on employees

    1. Check how much the National Minimum Wage is
    2. Find out how much National Insurance you need to pay for your employees
    3. Check how much sick pay your employees are eligible for
    4. Check how much you need to pay towards your employee's pension
    5. Check how much Maternity Leave you need to pay your employees
    6. Check how much Paternity Leave you need to pay your employees

  3. Step 2 Make your workplace safe and accessible for employees

    1. Prevent discrimination
    2. Make your workplace accessible for employees with disabilities or health conditions
    3. Keep employee information and data safe
    4. Fire safety
    5. Health and safety

    You also need to make checks when you recruit and employ someone.

    1. Find out what you need to check when you employ someone

  4. Step 3 Register as an employer and set up PAYE

    You need to register with HMRC so you can pay tax and national insurance for your employees.

    1. Register as an employer and set up PAYE
    2. Choose how to run payroll
    3. If you decide to run payroll yourself, choose payroll software

  5. Step 4 Check your responsibilities around workplace pensions

    1. Understand your pension responsibilities as an employer

  6. Step 5 Get Employers' Liability insurance

    1. Find out about Employers' Liability insurance

  7. Step 6 Recruit and employ staff

    1. Employ someone