Types of employee contracts

Get to know the status of your staff members

First published on Thursday, Jun 04, 2020

Last updated on Thursday, Mar 14, 2024

As a business owner, the status of your staff can take on any of the following forms:

  • Employee
  • Worker
  • Self-employed

What type of workers do I have?

Here are some differences between workers and employees.

Workers have rights, such as paid holiday, but they have fewer employment rights than employees.

Workers adhere to contract terms and, in some cases, they can hire someone else, like a subcontractor, to do the work on their behalf.

Types of workers include:

  • Freelancers
  • Zero hours staff
  • Seasonal staff

Employees carry out work personally and are legally bound by a contract.

Examples of employee rights are:

  • Itemised pay slips
  • Written statement of employment
  • Fair dismissal

Continuous employment contract

Continuous employment is when your employee has worked with you without a break. Continuous employment is calculated in months and years and begins on your employee’s commencement date.

After serving a minimum length of continuous employment, your employee will gain rights.

These rights include:

  • Maternity pay
  • Redundancy pay
  • The right to request flexible working

Generally, if there’s a break in employment of a week or more, the continuity of service is broken.

The following are some breaks that are part of continuous employment:

  • Sick, annual, and maternity leave
  • Anytime between unfair dismissal and returning to work
  • Military service

Fixed-term employment contracts

Your employees are on a fixed-term contract if their contract ends:

  • On a specified date
  • When they complete an agreed task

The following may be fixed-term employees:

  • A casual or seasonal employee hired for up to six months during busy periods
  • Someone who has been recruited for a particular project
  • A person who provides maternity cover

You must ensure that fixed-term workers and permanent employees have the same:

  • Pay
  • Conditions
  • Benefits package

It’s also your responsibility to ensure that fixed-term workers have:

  • Details about permanent job vacancies.
  • Protection against dismissal or redundancy.

You may be in breach of contract if you terminate the work arrangement before the specified date and there’s nothing in the fixed-term contract about ending the work prematurely.

Freelancers and consultant contracts

If you take on freelancers and consultants, they:

  • Are in business for themselves or as part of another company,
  • Account for their tax and N.I payments,
  • May not have the same rights as workers e.g. minimum wage.

However, you still have responsibilities towards freelancers and consultants. These duties include:

  • A contract that details their rights and responsibilities.
  • Health and safety protection on your premises.
  • Protection against discrimination (in some instances).

The differences between employees and non-employees aren’t always clear-cut.

Being taxed as self-employed doesn’t automatically mean that someone isn’t a worker or an employee. A court or tribunal makes the ultimate decision relating to employment status.

In general, someone may be a freelancer or contractor if they:

  • Bid or quote for work
  • Choose how and when to work
  • Sort out their tax and N.I payments.

Gig workers

Gig workers get paid for ‘gigs’ like delivering food, instead of getting a consistent wage. Gig workers are classified as independent contractors. This means that they have little or no rights relating to issues like unfair dismissal or receiving the minimum wage. However, the government has stated that it will review gig workers’ rights to afford them some protection.

Zero hour contracts

Your worker is on a zero hour contract if:

  • They’re on call to work as and when
  • You’re not obligated to give them minimum hours
  • They don’t have to accept work you offer.

The majority of zero hour contracts give workers employment status and the right to:

  • Statutory annual leave
  • Minimum wage
  • Health and safety provisions

You can’t stop someone who works on a zero hour contract basis from:

  • Looking for work
  • Taking on additional work elsewhere

Making decisions that are contrary to contracts can leave you open to legal challenge. Keep confidential documents such as employee contracts secure in BrightHR's centralised cloud-based document storage system.

Alan Price

CEO, BrightHR and Group Chief Operating Officer

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