Employment status

Whether you can be classed as self-employed - as opposed to an employee or a worker - often depends on the level of your independence. Genuinely self-employed individuals can exercise a large degree of flexibility and control over how, if, and when they work. They are generally able to send someone else to do the work without significant restrictions. It is a category that includes those who run and manage their own business or work. As the individuals are in business for themselves, they generally do not have access to statutory employment rights as they have the freedom to set their own terms and conditions.

Employment cases and classifying the self-employed

There has been a significant rise in new forms of working, such as 'gig' work or work arranged through digital platforms. Gig workers are paid for the 'gigs' that they do ie they work on demand through short-term contracts and freelance working arrangements eg delivering food to creative marketing tasks. Digital platform work is where a platform company manages the demand and supply of paid work through an online platform, usually an app or website. Examples include musicians, taxi drivers, and cleaning.

The classification of people engaged in the 'gig economy' has been considered by tribunals and courts in recent years, most notably when the Supreme Court ruled that Über drivers were 'workers' rather than 'self-employed independent contractors'. Other cases, through the Supreme Court such as Deliveroo, held that the individuals working for the platform were self-employed.

However, each case is examined on the specific facts, as seen in the Christopher Johnson v Transopco UK Ltd employment case. Whilst it was acknowledged there was an obligation of personal service, on consideration of all the facts, it was determined that Mr Johnson was not a worker. The government has recognised the challenges of the current system but concluded the risks of legislative reform outweighed the benefits.

Indicators of self-employment

Although there is no individual test that is decisive, you're likely to be classed as self-employed if you:

• have the final say in how your business is run
• risk your own money in the business
• are responsible for the losses as well as profits of your business
• provide the main items of equipment you need to do your job
• could send a substitute or are free to hire other people on your own terms to do the work you have taken on and pay them at your own expense
• are responsible for correcting unsatisfactory work in your own time and at your own expense
• have the ability to work for others at the same time as providing services for a particular employer

You can be employed and self-employed at the same time. For example, you may work for an employer during the day but run your own part-time business in the evening. However, there are clear legal risks to you remaining a day employee if your part-time evening business could be considered to be in competition with your day employment.

You must tell HM Revenue & Customs (HMRC) you are self-employed within three months of the end of the calendar month in which you became self-employed. If you don't, you could face a penalty.

Contractors

A contractor can be:

• self-employed
• have the employment status of a worker
• have the employment status of an employee if they work for a client and are employed by an agency

There is a special scheme for self-employed contractors and subcontractors working in the construction industry called the Construction Industry Scheme (CIS).

See using contractors and subcontractors.

If you sell your services through a third party, such as a limited company or partnership, IR35 rules may apply. Special rules also apply to individuals who provide services through a managed service company. Read more about IR35 and other special rules.

You should seek advice if you are unsure of your employment status or that of someone who works for you. You can contact the Labour Relations Agency (LRA) on Tel 03300 555 300 or the HM Revenue & Customs (HMRC) Employment Status Helpline on Tel 0300 123 2326.