Stuart Chamberlain, author and senior employment consultant at Croner-i, examines the tests used by courts and tribunals in the light of recent case law and discusses their implications for employers. He also considers the Government’s proposals for reform of the tests as set out in its December 2018 paper, Good Work Plan. The article concludes with some advice for employers.

Employment status continues to be one of the most topical areas of UK employment law. An individual’s employment status determines which employment rights apply and how much tax is to be paid.

The rise of new business models, particularly in the so-called “gig” or “platform economy”, has led to disagreements about the employment status of the individuals working in this sector. It is argued that the common law tests for employment status — especially those determining employees of self-employed status — are no longer relevant for the modern business world and merely create uncertainty.

The tier of employment rights

An individual doing paid work in the UK falls into one of three main categories:

  • an employee

  • a worker

  • self-employed.

The essential features of each category are described in general terms below.


Employees work under a contract of employment. Certain terms do then have to be put in writing — for example, ”The Written Statement”, within two months of the employee starting work.

They tend to work regularly although they do not have to be full time — for example, they could be on a fixed-term contract. They enjoy the full range of employment rights, notably (subject to meeting the two years’ qualifying service with the employer) the right to claim unfair dismissal and the right to a redundancy payment.


Workers tend to be people working on a more casual basis and often on a job-by-job basis. A worker is any individual who undertakes to do or perform personally any work or service for another party, whether under a contract of employment or any other contract. It does not matter if the contract is express or implied, verbal or in writing, provided the individual undertakes to perform the work or services personally, for an end-user who is not a client or customer.

They do not have full employment protection rights but are entitled to the National Minimum Wage, rest breaks and to paid annual holiday under the Working Time Regulations 1998.

Agency workers and short-term casual workers are likely to be workers, unless they are found to be self-employed.

The self-employed

The self-employed are not covered by the employment legislation. They run and manage their own business and have control over when and how they work. Their employment rights are restricted.

The Common Law tests of employment status

Some employers are understandably uncertain about the differences between “employees” and “workers” and the different rights which apply to them. These differences are determined by what are known as “common law tests”.

Case law has established that there must be an “irreducible minimum” of factors that determine employment status in respect of employment rights and for tax purposes. A court or tribunal will look at the following main factors.

  • That there is a contract between the individual and the employer.

  • That there is personal service — that is, whether the individual is required to do the work personally or can send a substitute (usually an indication of self-employment).

  • Control of the individual: who has control over the work done? The more indication of control, then the more likely the individual is an employee.

  • Mutuality of obligation: whether there is any commitment or obligation between the employer and the individual beyond that of a contract.

Other factors may also be considered:

  • financial risk (if an individual is in business on their own account — usually denoting self-employment)

  • the extent to which an individual is integrated into the business

  • the provision of equipment.

There is no one determining test; these are factors that must be taken into account in drawing the whole picture.

Recent case law

Recent case law has concentrated on employment status in the so-called “gig economy”. Uber (at the Court of Appeal), City Sprint, Addison Lee and Pimlico Plumbers (at the Supreme Court) have all argued unsuccessfully that they had created contracts that purported to ensure that their so-called “partners” — the drivers, cyclists and plumbers — were classed as “self-employed” or independent contractors. This allowed them to avoid having to pay the minimum wage, holiday and sick pay and liability for discrimination under the Equality Act 2010.

However, the courts and tribunals have consistently found that these contracts were a “sham”. The individuals were “workers” entitled to the National Minimum Wage and to paid annual leave. The judgments, although fact-sensitive, confirm the current trend of the courts to recognise the inequality of bargaining power for some individuals entering into these engagements, and the willingness to look behind the labels placed on staff by businesses, instead considering the reality of the underlying arrangements — following the Supreme Court’s judgment in Autoclenz v Belcher [2011] UKSC 41.

In the meantime, 27 artists and art lecturers are testing their employment status in the public sector. The claimants, some of whom have worked at the National Gallery for decades, were dismissed in October 2017 without any consultation or benefits as they were classified as self-employed freelancers rather than employees or workers. The case was heard at the beginning of December 2018 and judgment is awaited.

And it is not a one-way street for claimants. In 2017 the Central Arbitration Committee (CAC) rejected a claim from Deliveroo couriers that they should be recognised for collective bargaining purposes by the company. This decision was unsuccessfully appealed to the High Court under Article 11 (the right to collective bargaining) of the European Convention on Human Rights. The High Court ruled that Article 11 only applied to those in an employment relationship.

The Government proposals

In 2017 the PM commissioned the independent Taylor Review of Modern Working Practices. It made a large number of recommendations, the majority of which the Government accepted in early 2018.

The Review highlighted the feeling that the existing employment status tests have contributed to a lack of clarity and considerable uncertainty among claimants and employers. Indeed, the Review doubted the legislation is fit for purpose in a changing business world. It recommended, therefore, less emphasis in the tests on substitution and more on control. The Taylor Review noted the many recent “gig economy cases” (see above) in which individuals classed by businesses as self-employed have been found to be “workers”. It is also proposed that there should be greater alignment between the tests applied for the purposes of employment rights and tax.

The Government’s Good Work Plan of December 2018 announced that it would bring forward detailed proposals and legislation to improve the clarity of the common law tests, to reflect the reality of the modern working relationships and business practices. This includes dealing with situations where businesses attempt to avoid giving its staff employment rights by misclassifying or misleading its workforce about employment status.

Unfortunately, the Good Work Plan did not go into detail on what the new tests would be like or what this would involve.

The Government has commissioned independent research to help it to formulate its future proposals.

Advice to employers

  1. The outcome of the cases described above is a reminder for those employers which use independent contractors and casual staff to:

    • review these individual’s contractual arrangements and working practices

    • identify appropriate changes and amendments to prevent further and future legal costs — for example, all staff will need to be provided by 2020 with more information at the point of employment, such as a statement of their employment protection rights (including holiday entitlements and pension auto-enrolment) and a Written Statement.

  2. Be aware that the legal cases associated with the gig economy provide fertile ground for those seeking to make a claim of worker status. Check, therefore, that the documentation — particularly that dealing with contractual issues — accurately reflects the service that the individuals are providing. The written terms have to be significantly in line with the understanding of those carrying out the work. The courts and tribunals have shown themselves more than ready to look behind the wording of any contract to see what is happening and rule accordingly — as has frequently occurred in the “gig” cases.

  3. Employers should consider options to meet the increased costs once the Government has introduced the necessary legislation.

In the meantime, we wait for further details from the Government of the proposed reforms of employment status.

Last reviewed 6 February 2019