What is the difference between being an employee, a worker, and an independent contractor?

In the last five years the gig economy in England and Wales has nearly tripled. With such rapid growth, its unsurprising that people are confused. In this blog, employment solicitor Gabriel Morrison explains some of the terminology used around workers' and employee rights.

What does it mean to work in the gig economy?

Working in the gig economy commonly describes work carried out by individuals on a job-by-job basis,rather than that a more traditional “nine to five” environment with fixed hours and pay.

While not always the case, “gig” work is often provided to workers by companies via a technology platform such as a delivery or taxi app.

Classification of gig economy workers: What does it mean to be employee, worker, or independent contractor? 

Over the last few years, the way gig economy workers should be classified has been the subject of significant public scrutiny and a number of legal battles.

In UK law, there are three different types of employment status: employee, worker, and independent contractor.

An independent contractor will have a direct relationship with their customer. An individual, or business, pays the contractor for their services at the rate set by the contractor. The customer is not responsible for paying the contractor sick pay or holiday pay. For example, if you had a leak in your kitchen, you would contact a plumber, who would give you a quote and carry out the repairs which you would pay them for.

Workers also provide a service but as part of someone else's business, which usually means that the business exerts a certain level of control over their work. For example, the business might set their rate of pay and limit the worker’s right to sub-contract the work to someone else. An example of a worker would be an Uber driver. Leigh Day argued the Uber drivers should be classed as workers because of the amount of control the company exerts over them including deciding their routes and the ratings system used to assess performance.

An employee is someone who works for a business under an employment contract. Employment contracts will commonly include details such as the individual’s hours of work, salary and information about their right to certain leave (for example, annual or maternity/paternity leave).

All employees are workers, but not all workers are employees. The difference is, while all workers are entitled to workers rights, employees have additional rights as set out in their employment contract. This is due to the higher level of control the employer exerts over an employee.  

What rights am I entitled to?

Workers are entitled to rights such as holiday pay, the National Living Wage and protection from discrimination.

In addition to the above, an employee has additional rights that don’t apply to workers, such as the right to claim unfair dismissal and to receive redundancy pay after two years’ continuous service.

Does being classed as a worker affect tax status?

When it comes to employment rights in the UK there are three classifications – independent contractor, worker or employee. However, in UK tax classifications there are just two - employed and self-employed.

You can be classified as a worker for the purpose of claiming employment rights, but also be self-employed for tax purposes.