What is an Employment status?
An employment status refers to the rights and protections that employees are entitled to at work. The employment status determines the responsibilities that an employer owes to the employee. Whenever an employer hires new personnel, it is up to them to decide what type of employment status they are hiring under.
What are the types of Employment status?
There are three types of employment status:
The ‘worker’ is the most casual among the three types of employment status. A person can be described as a worker if:
- They have an arrangement to perform their services
- They have to show up for work even if they don’t want to
- They cannot subcontract their work out to other people
- They aren’t performing the work as a limited company
A person that falls under the “employee” employment status is one who works under a contract of employment. An employee is provided all the protections of a worker, but with additional employment rights and protections. A person is regarded as an employee if:
- They have a contract of employment
- They are generally required to work regularly unless they are on some type of leave
- They receive paid holiday
- They are subject to redundancy procedures
- They are also required to work a minimum number of hours and can’t subcontract another to do their work for them.
A self-employed person runs their own business for themselves and are singularly responsible for its success. Unlike employees that enjoy employment rights, the self-employed are not protected by similar safeguards. A person is considered to be self-employed if:
- They don’t get a holiday or sick pay when they are not working
- They give out ‘quotes’ for their work
- They submit invoices once their work is done
- They have a contract with their client which will determine their obligations and the payment that they receive for that work.
Is determining employment status important?
The employment status an employer chooses will determine their relationship with their employee. They must choose one that will best describe the manner in which they are going to work together.
Choosing the wrong type of employment status may lead to problems further in the future. For instance, if a small business offers more employment security than it can afford, the business may find itself with fewer hands at critical moments because employers won’t be able to rely on the team when they need them.
What employment status should you hire for your business?
Before an employer selects the right employment status for its new hire, they first need to determine the kind of work they need them to do. The different types of employment status provide different offerings to employers. And the different statuses also creates a varied dynamic between employer and employee.
- The ‘worker’ employment status is a very flexible one. An employer cannot coerce the worker into accepting any they are offered, but neither are they obliged to offer the employment protections of a fully-regarded employee.
- The ‘employee’ employment status offers more stability. The contract offers a security to the employer that the can rely on the employee in fulfilling their duties. But, they need to offer this in exchange for a more secure employment package for the employee.
- The ‘self-employed’ employment status offers the employee the most freedom and flexibility, but they aren’t protected by any employment rights. They would be a great option for companies that require help on a single project.