Employment & Self-employment

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 self-employed worker.

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 here ) 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.

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