Employment and Self-employment
When you engage an individual worker to provide services to your business
directly (i.e. not through a PSC or other intermediary company), or you are
that worker, it is important to consider whether the worker has the status
of an employee of the business or is instead a self-employed person.
We use the catch-all expression “worker” below to refer to an individual
(as opposed to a company, partnership or other organisation), whether they
are an employee or self-employed. Both in the private sector business world
and the public/voluntary sector, any one of a range of expressions might be
used by an individual worker or a business engaging them to describe a
Any of the following expressions will often be used to describe an
individual who is a “self-employed” person: “sole trader”, “sole
proprietor”, “self-employed”, “one man business”, “consultant”,
“contractor”, “subcontractor”, “freelancer”, “independent contractor”.
These are not legally defined expressions, they are imprecise, and they
have no particular meaning for tax or legal purposes. It is important to be
aware that each of these expressions is only a commercial/customary
expression, not a legal or technical expression. In every case though, if
the person concerned is genuinely self-employed, their legal status will be
the same, whatever the expression used. Conversely, if in reality they are
an employee, that will be their status whatever expression is used to
describe their relationship to the business engaging them.
The difficulty for both an individual and the business which engages them
to provide services is that, in terms of legal and tax status, the fact of
merely labelling an individual as “sole trader”, “self-employed”, ”one man
business”, “consultant”, “contractor”, “subcontractor”, or “freelancer”
does not mean that they actually will be “self-employed” in law. Despite
any such labelling, they might in fact be employees in law. This is
explained in the information pages below and in the Guidance Note.
The Business documents include templates which can be used as a basis for
creating forms of agreement between a client business and a self-employed
worker (to see those templates, click
) but use of any such document does not in itself make them
“self-employed”. Whether someone is in law self-employed is a question of
law, and the use of particular document or labelling does not in itself
render someone to be self-employed.