Employment

What is employment and the status of employment?

Fadumo IsmailFadumo Ismail
Last updated on:
August 21, 2022
Published on:
July 26, 2022

Read our guide to employment agreements

Read the Guide

As a business, you may be preparing to employ staff for the first time. Before doing so, it is important to get familiar with what constitutes employment and the status of employment.

What is employment?

A contract of employment refers to a legally binding written or verbal agreement of service between two parties, the employer and the employee. The Employment Rights Act 1996 defines a contract of employment as a contract of service or apprenticeship, to which the employee has entered into. The employer takes on the employee under particular stipulations known as express or implied ‘terms’, which include:

  • Employment conditions
  • Payments
  • Rights
  • Duties

Generally, an employer and an employee can enter into an agreement together with whatever terms they choose. However, an employee cannot agree to contractual terms that provide fewer rights than already granted under law. 

What are express terms?

The express terms are explicitly agreed between the employer and employee. In the past, most workers were hired by an oral contract, but today it is normal for many companies, including small businesses to issue written contracts for their employees to sign. Employee contractual documents typically include the terms and conditions of employment and the principle guide to the employee’s rights and obligations. 

The express terms include:

  • The parties’ details
  • The date of continuous service and notice of termination of employment
  • The hours of work, including overtime hours
  • The job title and place of employment 
  • Benefits and remuneration
  • Sick pay, redundancy pay and holiday pay 

Before drafting the express terms, employers must be familiar with the relevant statutory provisions, such as employment status, equal pay and the minimum wage and must comply with the minimum legal standards to avoid legal action by employees. 

What are implied terms?

Terms may also be implied if there is nothing explicitly agreed between the employer and employee. Implied terms are presumed to form part of every contract of employment unless there are express terms that directly contradict what has already been agreed. Implied terms of the contract of employment and the implied obligations include: 

  • An employer’s duty to take reasonable care of the health and safety of employees and provide a safe system of work
  • A duty of mutual trust and respect between employer and employee
  • The right to receive at least the national minimum wage
  • The employee’s and employer’s right to a minimum notice of termination of the contract
  • An employees’ duty to serve the employer faithfully and in the best interest of the employer

These implied terms are typically deemed to be necessary in order to give the employment contract business efficacy and are presumed to supplement and qualify the express terms, thus arising out of the context of work relations.

Create lawyer-approved contracts for free for 7 days

What is an Employment Contract?

If you are employed, there is a contract between you and your employer. A contract of employment is no different from any other contract that can be entered into. There is a requirement of:

  • An offer made by the employer for a contract of employment which is clear and unequivocal 
  • An acceptance of that offer by the employee
  • Consideration of the agreement by way of services provided by the employee for remuneration by the employer, and lastly;
  • An intention to create a legally binding contract

Not providing an employment contract to an employee can create significant risks for the employer.

What are the main types of employment statuses?

Under employment law, the status of an employee is material in order for regulation to identify both the employee’s rights and the employer’s responsibilities and who is covered by legislation. UK law currently recognises three main types of employment status:

An employer may have written terms to describe what the status of the employment is. However, it is ultimately how the employee and the business organisation work together that will determine the employee’s rights and status of employment

Worker

A person is more likely classed as a worker if:

  • They have an agreement to do work or services personally for a reward 
  • The work done for their employer is less structured and irregular  
  • The worker is not offered guaranteed hours of work by employer
  • The worker has limited power to send someone else to do the agreed work
  • The employer provides the tools or materials needed for the work to get done 

Workers also have employment rights including:

Workers are therefore not usually entitled to:

  • A minimum notice period for the termination of an agreement 
  • Protection against unfair dismissal 
  • Statutory redundancy pay 

Employees 

An employee is someone who works under an employment contract. An employee might have a different status for tax purposes, though there is no statutory test to determine an individual’s employment status for tax purposes. Employers are therefore responsible for working out the worker’s status for the purposes of employment law and tax law. 

Employees are also workers with the same rights, but employees benefit from additional statutory rights, which include:

  • Statutory sick pay
  • Statutory maternity pay and leave
  • Statutory paternity pay and leave 
  • Parental bereavement pay and leave 
  • Minimum notice period if employment contract is terminated
  • The right to request flexible working
  • Protection against unfair dismissal

Self-employed and independent contractor

A person is more likely classed as self-employed or an independent contractor if:

  • The worker is responsible for how and when they work 
  • The worker is the owner of a business and takes responsibility for any success and failure
  • The worker is a freelancer 
  • The worker invoices rather than having wages

In most cases, employment law does not extend protection to the self-employed as they are their own bosses and are therefore responsible for their own health and safety and protection against discrimination. 

An employee is therefore someone who works under the employment agreement. An employment contract draws a binary distinction between employees and independent contractors or between contracts of service and contracts for services. This distinction is paramount in connection with the scope of vicarious liability of employers. This means if an employee causes loss to another person by committing a tortious act that causes harm to another during the course of employment, the employer would be legally liable. Contrastingly, such liability is not imposed on torts committed by independent contractors due to the lack of sufficient connection between both parties.

About Legislate

Legislate is a contracting platform where business owners can create contracts to help grow and develop their business. Legislate's employment contracts and offer letters are key in protecting your IP and Legislate's NDAs are crucial to ensure you can have conversations and partnerships to help develop your business and brand. Book a demo or sign up today to put the confidence back into contracting.

 

The opinions on this page are for general information purposes only and do not constitute legal or financial advice on which you should rely.

Create your employment agreement now

Get Started

Keep Reading

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.