This information is correct at the time of going to press but please do check to make sure there have been no changes since at www.direct.gov.uk

Workers and Employees

The definition of 'employee' and 'worker' differs slightly. Generally if rights apply to a 'worker' they also apply to an 'employee'. Employees also have some additional employment rights. A self-employed person for tax purposes, would normally  be 'self-employed' for employment rights' purposes.

Employee

Persons are classed as an employee if they are working under a contract of employment. A contract need not be in writing - it exists when an employee and an employer agree terms and conditions of employment. It can also be implied from the actions of the employer and employee.

The contract will normally set out what the employee is expected to do. The employee will usually be expected to do the work themselves- i.e. they can't send someone else to do the work for them.

Worker

This is a broader category than 'employees' but normally excludes those who are self-employed. A worker is any individual who works for an employer, whether under a contract of employment or any other contract where an individual undertakes to do or perform personally any work or services. Workers are entitled to core employment rights and protections. The following groups of people are likely to be workers but not employees:

·         most agency workers

·         short-term casual workers

·         some freelancers

Rights of workers

Providing any other qualifying conditions are met, all workers have rights to:

·         the National Minimum Wage

·         working time limits, including rest breaks,

·         paid holiday

·         limits on night work

·         protection against unauthorised deductions from pay

·         maternity, paternity and adoption pay (but not leave)

·         protection against less favourable treatment because of being part time

·         Statutory Sick Pay

·         protection against less favourable treatment if you make a disclosure in the public interest (often called ‘whistleblowing’)

·         not be discriminated against unlawfully

Self-employed

Self-employed persons do not have a contract of employment with an employer. They are more likely to be contracted to provide services over a certain period of time for a fee and be in business in their own right. They will also pay their own tax and National Insurance contributions (NIC).

Self employed persons do not have employment rights liked employed persons. They are their own boss and can therefore decide, for example, how much to charge for work and how much holiday to give themselves. However, they do have some legal protection.

For example:

·         they mustn't be discriminated against

·         they are entitled to a safe and healthy working environment on your client's premises.

·         self-employed women who have recently left their jobs may be entitled to Maternity Allowance.

It is possible, in some limited cases, to be self-employed for tax purposes but classified as a 'worker' or an 'employee' for employment rights purposes.

Employment contracts

An employment contract, or ‘contract of employment’, is an agreement between an employer and an employee which sets out their employment rights, responsibilities and duties. These are called the ‘terms' of the contract.

An employment contract doesn’t have to be in writing. However, an employee is entitled to a written statement of main employment terms within two months of starting work.

The employment contract is made as soon as an employee accepts a job offer. If the employee starts work it will show that they have accepted the job on the terms offered by the employer, even if they don’t know what they are. Having a written contract could cut out disputes with employees at a later date, and will help them to understand their employment rights.

Both employee and employer are bound to the employment contract until it ends (usually by giving notice) or until the terms are changed (usually in an agreement between both employer and employee).

The terms of a contract

The terms of an employment contract can be of several different types, some of which do not need to be written down. You should be aware of what the terms of your employment contracts are.

Written statement of employment

If you are an employee who has been working for your employer for longer than one month, you have the right to receive a written statement of employment particulars. This must be provided by your employer within two months of you starting, even if you are going to work for them for less than two months. The written statement will set out some of your main employment rights.

Contract to provide services

If you have a ‘contract to provide services’ or a 'contract for services' with someone, then this is different from an employment contract and generally means you are self employed.

A contract to provide services is an agreement between you and another person to undertake some work for them (for example paint their house). You do not become an ‘employee’ for this person - you just provide them with a service.

Persons provided by a temporary employment agency may be contracted under a 'contract for services'. 

National Minimum Wage

The National Minimum Wage (NMW) is a minimum amount per hour which most workers in the UK are entitled to be paid. With a few exceptions, it applies to all workers over the compulsory school leaving age. The rate is reviewed every year. Any changes take place in October.

All employers have to pay the NMW to workers who are eligible for it – there are no exceptions for different types or size of employer. Where you work in the UK makes no difference to the level of NMW you should receive.

Minimum Wage Current NMW rates ( Sept 2009)

There are different levels of NMW, which depend on your age. The rates from 1 October 2008 are:

·         workers aged 22 and over receive the full rate of £5.73 an hour

·         workers aged 18 to 21 inclusive, receive a rate of £4.77 an hour

·         young worker 16 – 18 receive £3.53 an hour

A young worker is someone who is older than school leaving age and younger than 18. You are under school leaving age until the end of summer term of the school year in which you turn 16. 

Part Time workers

Changing from full to part time in the same job

If you have changed to part-time working in the same role, then you are able to compare your part-time conditions with your previous full-time contract. This also applies if you are returning part-time after maternity leave.

Treating part timers differently to full timers

A part-timer can be treated less favourably if there is 'objective justification' for doing so. This means that the employer has to show that the reason is necessary, and is the right way to meet a genuine aim of the business. Part-time workers can't be treated less favourably just because they are part time.

'Less favourable treatment'

Part timers should receive the same treatment at work as an equivalent full-timer, so any job benefits, employment terms and conditions or opportunities open to full-timers should also be available to part timers. The benefits are normally ‘pro rata’, meaning that they should be in proportion to your hours. For example if an equivalent full-timer gets a £1,000 bonus and a part timer works half the number of hours, they should get a £500 bonus.

It may not be possible to pro-rata some benefits to part-timers (for example, health-club membership). In this situation your employer would have to decide either to give the benefit to both full- and part-time staff or (if there was objective justification) not to give part-time workers the benefit.

An employer is entitled to offer better terms to part-timers, perhaps to encourage a more balanced workforce, but they will need to be sure that doing this is not against other discrimination laws

Public / Bank holidays

Where an employer gives additional days off for bank and public holidays the rights of part-timers may not always be clear. Under a shift system where all full-time and part-time workers are equally likely to be scheduled to work on a bank holiday then it may be enough for the employer to give all part-time workers a paid day off.

However, if a worker does fixed days each week, such a practice could put them at a disadvantage. For example, because most bank and public holidays fall on a Monday, those who do not work Mondays will be entitled to proportionately fewer days off. In cases like this, the employer could give all workers a pro rata entitlement of days off in lieu according to the number of hours they work. The employer can then control when employees take holidays, coinciding with any public / bank holidays.

Public / bank holidays

Special bank holidays

There are laws that allow the dates of bank holidays to be changed, or other holidays to be declared, for example to celebrate special occasions.

The most recent examples of special bank holidays were for the Royal Wedding in 1981, the Millennium holiday in 1999 and the Queen’s Golden Jubilee in 2002.

Sick pay, maternity, adoption and paternity leave and pay

Part-timers are entitled to the same rights to sick pay, maternity, paternity and adoption leave and pay, and parental leave as full-time staff. If companies give more than the statutory entitlement, part-timers must also get these contractual benefits.

Holiday Entitlement

There is a minimum right to paid holiday, but an employer may offer more than this.

Minimums

From 1 April 2009 all workers have a statutory right to at least 28 days' paid holiday if they work five days a week. Employers can choose to include public / bank holidays in the 28 days.

Part timers are also entitled to holiday pay calculated as 5.6 times their normal number of days per week i.e. if someone works 3 days per week multiply by 3 x 5.6 = 16.8 or 17 days per year, which may include bank holidays

Employees:

·         start building up holiday as soon as they start work

·         the employer can control when employees can take holidays

·         normal pay rates apply for holiday pay

·         when an employee leaves, they get paid for any holiday they have not taken

·         bank and public holidays can be included in the minimum holiday entitlement

·         employees continue to be entitled to holiday leave throughout ordinary and additional maternity leave, paternity and adoption leave

Income tax and national insurance contributions

An employer is obliged by law to deduct Income Tax and National Insurance contributions (NIC) from employees salary or wages before paying them.

National Insurance Rates

The following amounts apply for the 2008-2009 tax year:

If you're employed

·         if you earn above £105 a week (the 'earnings threshold') and up to £770 per week you pay 11 per cent of this amount as 'Class 1' NICs

·         you also pay one per cent of earnings above £770 a week as Class 1 NICs

·         you will pay a lower amount as an employee if you are a member of your employer's contracted out pension scheme

The following amounts will apply for the 2009-10 tax year

·         if you earn above £110 a week (the 'earnings threshold') and up to £844 per week you pay 11 per cent of this amount as 'Class 1' NICs

·         you also pay one per cent of earnings above £844 a week as Class 1 NICs

·         you will pay a lower amount as an employee if you are a member of your employer's contracted out pension scheme

If you're self-employed

·         you pay 'Class 2' NICs at a flat rate weekly amount of £2.30 (£2.40 for tax year 2009-10)

·         you also pay 'Class 4' NICs as a percentage of your taxable profits - you pay eight per cent on annual taxable profits between £5,435 (£5,715 for tax year 2009-10)and £40,040 (£43,875 for tax year 2009-10)and one per cent on any taxable profit over that amount

·         if your earnings in the 2008-2009 tax year are expected to be less than £4,825(£5,075 for tax year 2009-10) then you may be entitled to the Small Earnings Exception (SEE), meaning you don't have to pay any Class 2 NICs - you can apply for SEE for the 2008-2009 tax year on form CF10