The way you work - and the way people work for you - have very important legal implications.
There are four categories of employment recognised by the law and the tax system. A person could be classed as:
- a worker
- an employee
- a director
There are also essential tax and National Insurance contribution (NICs) differences for different categories of employment. As an employer, you must recognise which category the people who work for you belong to, to ensure you fulfil your legal and tax obligations to them.
It should be noted that while an individual's tax arrangements can be a factor in determining their employment status in relation to employment rights, the fact that HM Revenue & Customs (HMRC) have, for example, taxed an individual as an employee does not automatically determine that person's employment status.
This guide provides a general overview of the different employment status categories and what they mean.