Your employment status can have a big impact on how you pay tax and National Insurance and your rights as a worker.
In this guide, we take you through the different ways you can be employed, and what you need to know about each one. Bear in mind that these categories are not exclusive. For example, both employees and workers are listed here, but all employees are considered workers as well (though not all workers are employees).
Worker
The term ‘worker’ refers to anyone working for someone else under any kind of contract, written or unwritten. This includes full or part-time employees, casual workers, agency workers or certain freelance workers.
Workers are entitled to the National Minimum Wage, the statutory minimum level of paid leave, breaks, protection against unlawful discrimination and protection for ‘whistleblowers’ (those who report wrongdoing at work). They are also required to work no more than 48 hours a week and protected against unlawful deduction of wages. Other rights and benefits that workers receive will depend on the employer and the terms of their contract.
You can read more about the National Minimum Wage in our article What is the National Minimum Wage in the UK?
Employee
The majority of working people in the UK are considered employees, meaning they will have a written employment contract with their employer that clearly lays out each party’s duties and benefits.
Employees are paid on a Pay As You Earn (PAYE) basis, so that tax and National Insurance contributions are deducted from their salary automatically.
In addition to workers’ rights, employees are also entitled to statutory sick pay, holiday pay, statutory redundancy pay and statutory maternity/paternity/adoption leave with pay.
Zero hour contract employment
Workers on a ‘zero hour’ contract are employed by a company but not guaranteed a set number of hours. This is not a legal term, and what this type of ‘contract’ entails can be unclear. However, generally, you are offered work when it’s available, and may be able to accept or decline this. For example, ‘zero hour’ contracts are common in hospitality and courier work.
These workers may be classified as employees or workers, depending on the company and the contract. Your benefits and pay arrangements will depend on this as well.
However, you are entitled to at least the minimum wage for the hours you work, as well as all other statutory employment rights. You will be paid on a PAYE basis, meaning that your employer will deduct tax and National Insurance contributions on your behalf.
Self-employed
There are a growing number of self-employed people, and they may include business owners, freelancers, and independent contractors.
If you’re self-employed, you are responsible for paying any tax you owe and National Insurance contributions, and this involves registering as self-employed and completing a self assessment tax return. You’ll also need to sort out your own pension, and you can find out more in our guide Pensions for the self-employed.
You aren’t legally entitled to employment benefits or the minimum wage, since you work for yourself. However, you are covered by the 2010 Equality Act and Public Sector Equality Duty, which should protect you against discrimination when dealing with other companies and public authorities.
Independent contractor type of employment
Independent contractors fall under the self-employed umbrella, though the term can also be used to describe a company or corporate entity. An independent contractor is a person or company that provides goods or services to clients when needed, but isn’t classed as an employee. Independent contractors, for example, may include some lawyers or construction workers.
Even though independent contractors are contracted by other people and companies, they are still considered self-employed.They need to register with HMRC and pay their own tax and National Insurance by completing a tax return.
As an independent contractor, your rights will depend on the terms of each individual contract. You may be classified as a worker and have access to employment rights, usually if you are on a contract that runs for three months or longer. You will usually be covered under standard Health and Safety legislation, as it is the employer’s responsibility to maintain a suitable working environment.
Freelancer
Freelancers are similar to independent contractors, as they are self-employed workers with particular skills, who are used by companies when needed. The main difference is that as a freelancer, you will generally not commit to working for a single client for an extended period, and you’re likely to work for multiple clients at once. Examples of freelancers might include writers, photographers, journalists and designers.
As a freelancer, you will need to register as self-employed and fill in a Self Assessment tax return. Your rights are fairly limited, but you are covered under Health and Safety legislation and anti-discrimination laws.
Gig economy employment
Members of the so-called ‘gig-economy’ are workers who use an intermediary app or website to find jobs. Use of the app or website is considered a service, and is deducted from their earnings (normally around 10 or 15%).
For many years, members of the gig economy were considered self-employed, meaning they had very little in the way of protections and rights, even though they often worked solely for one firm, such as Uber or Deliveroo.
However, the UK supreme court ruled in 2021 that Uber drivers must be considered workers instead of self-employed, with a number of similar court cases underway for other companies. EU proposals are also expected to grant employee rights to all members of the gig economy, and it is thought that the UK might follow suit.
For the time being, though, most gig economy workers are still considered fairly vulnerable, with few rights or protections in place outside of standard Health and Safety legislation and anti-discrimination law.
Generally , workers in the gig economy can choose their hours, but must complete their own tax return and pay National Insurance contributions.
Apprentice
Apprenticeships are one to five year courses designed as a way to receive a qualification and earn a salary at the same time.
Apprentices aged over 19 are entitled to £4.81 an hour in their first year, and the National Minimum Wage for their age range every year after that.
Most apprentices are entitled to employment rights such as paid leave, breaks and Health and Safety protection. Generally, there are fewer scenarios in which an apprentice’s contract can be terminated compared to other types of workers – usually this only occurs following gross misconduct or the company going bust.
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