How To Decide if an Individual is Employed or Self-Employed

A recent focus on companies such as Deliveroo and Uber has highlighted the issue of whether someone is classed as employed or self-employed. Read on to learn some guidelines that can indicate the employment status of a worker.

The self-employed have very few rights, whereas someone classed as employed enjoys the most.  For example, with the self-employed, there is no requirement to pay national minimum wage, holiday pay or sick pay.  In return, they get to control their own work, set their own hours and can work for a variety of different people.

For some companies, it is attractive to not be bound by employment law, but if they wish to control their workers, the lines can become blurred.

There are a number of tests which indicate employed or self-employed status – no single test is conclusive, but overall, they can give a good indication of the correct position. The onus is on the employer to deduct PAYE from payments made where any doubt exists until clearance is obtained from HMRC.

Guidelines that Indicate the Worker is an Employee

As a general guide as to whether a worker is an employee or self-employed, if the answer is ‘Yes’ to all of the following questions, then the worker is probably an employee:

• Do they have to do the work themselves?
• Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
• Can they work a set amount of hours?
• Can someone move them from task to task?
• Are they paid by the hour, week, or month?
• Can they get overtime pay or bonus payment?

Guidelines that Indicate the Worker is Self-Employed

If the answer is ‘Yes’ to all of the following questions, it will usually mean that the worker is self-employed:

• Can they hire someone to do the work or engage helpers at their own expense?
• Do they risk their own money?
• Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
• Do they agree to do a job for a fixed price regardless of how long the job may take?
• Can they decide what work to do, how and when to do the work and where to provide the services?
• Do they regularly work for a number of different people?
• Do they have to correct unsatisfactory work in their own time and at their own expense?

For anyone in any doubt, employment status can be checked by using the HMRC service found here:

https://www.gov.uk/guidance/check-employment-status-for-tax

Records of the result aren’t kept, and HMRC state they will stand by the result given unless a compliance check finds the information provided was not accurate.

Grab the resources you need!

If you’re studying for your CII AF1 exam, and you’re wanting to feel confident on exam day, you’ll need to prepare as much as possible. Grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the AF1 calculation workbook taster now!

Alternatively, you can download a taster resource for AF5 or R03, if you are revising for one of those exams.