ESM0544 - Guide to determining status: holiday pay, maternity pay, sick pay and pension rights

Entitlement to paid leave by virtue of agreed contractual terms and conditions suggests an employment exists. It is normally inconsistent with a contract for services. The Courts took this view in Alpine (Double Glazing) Company Ltd v The Secretary of State for Social Services (1982) (unreported) in which it was held that the company’s service engineers were employed.

Not all employees have a contractual entitlement to paid leave, particularly where the engagement is short-term and hence little significance can be attached to their absence in such circumstances.

Where entitlement to paid leave exists solely because of the rights a worker has under the Working Time Regulations, it is not a factor to be taken into account in determining status. Employed workers and some self-employed workers acquire rights to paid leave under the Regulations if they have been continuously engaged for 13 calendar weeks. However, if any changes were made to contracts giving rights to paid leave, these should be taken into account in the normal way.

Entitlement to Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP) and pension rights are consequences of employment and are not indicators of employment.

Only employees are entitled to Statutory Sick Pay(SSP). Normally membership of a firm’s superannuation fund is open only to employees. In both cases the right to participate is an indication of the relationship the parties think they have created rather than a test of whether an employment exists.

Both parties may genuinely believe a worker is self-employed. But, if the worker is in fact an employee, entitlement to the rights of an employee will follow. Entitlement to SSP etc does not determine employment status. It is the other way round.

The absence of benefits such as sick pay, pension scheme membership, maternity rights, etc. in a short-term engagement will almost certainly be because they are inappropriate in such circumstances. Their absence may therefore be of little relevance in this type of situation and certainly will not inevitably lead to the conclusion that an employment does not exist.

On the other hand, the existence of such entitlements in a long-term part-time engagement can be regarded as a strong indicator that an employment exists.

The important point to remember though is that the presence or absence of these rights does not necessarily determine whether a worker is employed or self- employed. On the contrary, it is the employment status (and the length of the contract) which determines whether the worker is entitled to many of these rights.