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Contracts and employment status

Contracts and employment status

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Employment status

There are three different types of employment status. It is often difficult identifying which category a person might fall under.

Individuals undertaking work will be either:

  • employees – with full statutory employment rights
  • workers – with more limited rights, or
  • self-employed or have no employment status – with no statutory rights, but they may have rights under their contract and will also have health and safety protection.

The table shows the probable employment status for different categories of a typical worker. Whether people fall in the “most probably to include” and “may include” columns will depend on their individual circumstances.

 

Employment status

Rights

Most probably to include

May include

Employee

All statutory employment rights, including unfair dismissal, redundancy and all those below

people in typical forms of employment; apprentices

freelancers; consultants; sessional workers; zero- hours contracts; interns doing work themselves

Worker

Some rights – protection from discrimination, national minimum wage, paid holidays, representation at grievance/ disciplinary (see section 3.2) and those below

freelancers; consultants; sessional workers; zero- hours contracts; interns doing work themselves

volunteers; work experience (if undertaking work rather than just shadowing)

None

Health and safety rights, contractual protection

genuinely self employed; work shadowers; volunteers

 

 

Employee

Employees are employed under a contract of employment and will usually be working in a typical employment pattern.

Mutuality of obligation  

The requirement on the employer to provide work, and the employee to undertake it, is key to determining whether someone is an employee. If there is no such obligation in practice, there is unlikely to be a contract of employment. For example, if an individual is not obliged to turn up for work, and the employer has no obligation to provide work for periods of time, they are unlikely to be an employee (although they may still be a worker).

Employees are entitled to the full range of statutory employment rights including:

  • unfair dismissal
  • redundancy
  • the right to a written statement of particulars of employment
  • not to be discriminated against
  • all the rights of workers.

Worker

For some statutory employment rights there is a broad category of worker. This applies to someone who does not necessarily meet all the usual tests for being an employee and who is not genuinely self-employed.

The definition of a worker under the employment rights act is someone who works under a contract of employment or “any other contract... whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.

Different definitions are used in the Equality Act and in respect of whistleblowing legislation, but the broad effect is the same.

The Employment Rights Act definition includes people who provide work personally under a contract, where they are not genuinely operating as self-employed, even if they are not deemed to have full employee status.

It also includes most freelancers, consultants, interns, sessional or casual workers, agency workers and those on zero-hours contracts.

All these people may be working with a greater degree of flexibility than in the traditional employee relationship, but are still working personally for someone else and cannot be said to be in business on their own account.

Self employed

The genuinely self-employed are excluded from all statutory employment rights. However, they have contractual rights in respect of agreements to undertake a job.

Self-employment is where the person is genuinely in business on their own account.

Some contracts will be drawn up on the basis that someone is working as self-employed, when in fact they are an employee or worker and have employment protection rights.

Tribunals and courts will consider the reality of the situation, rather than simply accepting the label that the parties have given to the relationship.

Some volunteers are not covered as workers or employees and therefore have no employment protection rights.

Contracts

Fixed-term contracts

A fixed-term contract is where the employment contract is:

  • for a specified period
  • to complete a particular task, or
  • ends on the occurrence (or non-occurrence) of a specific event.

Being on a fixed-term contract can affect:

  • career progression
  • access to training
  • the ability to get a mortgage.

Many employees across the economy work on fixed-term contracts or as casual staff. Prospect opposes the indiscriminate use of temporary appointments because they undermine the security, terms and conditions and career development of all our members. We campaign for parity of terms and conditions between members on temporary and permanent contracts.

Individual or personal contracts

A personal contract is not subject to collective bargaining. Terms and conditions of employment, especially pay, are individually agreed without being collectively negotiated. The contract can be tailored by the employer so that employees have different terms of employment, benefits or pay arrangements to their colleagues.

Pay is often the only truly personal element, and even that is not always the case. Personal contracts within an organisation or a group of workers are often fairly standard.

Legally, all contracts of employment are individual, as the means of enforcing any contract is down to the individual employee and employer. Staff on personal contracts have the same statutory employment rights as other employees.

People on personal contracts can still belong to their trade union and have as much need for union assistance as other members with collectively agreed terms.

Zero-hours contracts

A zero-hours contract is one with no minimum set hours. The employer can call the worker in when needed. The worker has no guarantee of work or pay in any particular week. Prospect is strongly opposed to the use of these contracts and the insecurity and unfairness that is endemic in their use.

Many Prospect members work on contracts with no minimum or guaranteed hours. These are often described as freelance, consultants, or sessional workers. The term “zero hours” may not be used as frequently as in many other sectors, but the impact is just the same.

In theory there is no obligation on a zero-hours contract worker to accept offers to work, but in reality if they do not, they are unlikely to be called in again. The so-called flexibility is only one-way.

Employers contend an absence of an obligation to offer or undertake the work means the worker has no legal rights. This makes zero-hours contracts very attractive to the employer.

But workers on zero-hours contracts have:

  • serious insecurity
  • extreme variation in pay
  • a reduced means of challenging unfairness.

In many cases zero-hours contract workers do have statutory rights. “Zero hours” has no specific legal meaning. An employment tribunal has to determine the legal status of the contract and apply a range of established factors, such as the means of payment, degree of supervision, obligation to do and provide work, and whether a substitute could be sent along.

Applying these tests, tribunals have often determined that the reality of the situation is that there is an obligation on the worker and they are in fact employees or workers with legal rights at work.

Prospect has challenged this in many cases and has secured acceptance that the workers are in fact employees with full rights, despite varying hours of work.

 

There are strict time limits for making claims to an employment tribunal. For most types of claim, including unfair dismissal or discrimination, the process must be started within three months of the dismissal or incident occurring.  So it is extremely important that members seek advice as soon as possible.

Legal advice and assistance is offered at the union's discretion and is decided on the facts and merits of each case. See our legal advice guide for details of our services and the terms and conditions for advice.

The law is somewhat different in Northern Ireland, the Channel Islands and the Isle of Man. Members in these areas should contact their negotiator or Prospect's member contact centre for more information.