Being able to identify yourself as an employee is important because it will determine what statutory rights you will have. Employees are generally entitled to the highest level of employment rights; they will also be entitled to the rights that require only worker status as well.
Section 230 (1) of the Employment Rights Act 1996 defines an employee as:
"an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment. A contract of employment means a contract of service or apprenticeship, whether express or implied and (if it is express) whether oral or in writing."
A number of cases have held that to meet this definition there must be several elements present:
Contract - there is a legally binding contract between the parties;
Personal performance – the worker must have agreed (explicitly or by implication) to carry out at least some of the work personally (that is, with her/his own hands rather than by hiring someone else to do it for her/him). However, a contract which allows the worker occasionally to bring in a substitute if s/he is ill may still be a contract of employment. On the other hand, a contract which gives the worker unrestricted rights to bring in a substitute whenever s/he wants to will not be a contract of employment.
Control - how much day-to-day control does the employer have over what the worker does and the way the worker does it? If the employer has sufficient power over the worker to tell her/him when, where and how to perform her/his work, this would be a significant indication that the worker is an employee. Provided the worker is subject to the control of the employer as to her/his work, the fact that s/he is allowed to work without supervision when s/he is a skilled worker does not alter the fact that s/he is an employee.
Mutuality of obligation - for a contract of employment to exist at all, the employer and the worker must be under some obligation towards each other. The employer has an obligation to provide the worker with work, or at least pay a retainer if no work is available, and the worker has an obligation to carry out that work. This is a key test - if there is no mutuality of obligation, it is highly unlikely that a contract of employment exists at all. If the employer has provided the worker with other work when her/his usual type of work was not available, this would be a very strong indication that the worker is an employee.
Though the criteria above must be present for an employee relationship to exist, the fact that they are present is not always conclusive, as other factors must be taken into consideration (see below).
In discrimination legislation, ‘employee’ is given a slightly wider definition. The Equality Act 2010 defines an employee as someone in ‘employment under a contract of service or of apprenticeship or a contract personally to execute any work or labour’.
This definition is wider and catches people such as agency workers, who are not employed by the business they work for, but have a contract to personally do work for that business.