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What is the difference between an employee and a contract worker?

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Whether a worker is an employee or a contractor can be an important distinction, with certain rights and responsibilities attaching to employment status, including in respect of unfair dismissal and redundancy payments.

Employees work under a contract of employment, while a contractor works on the basis of an undertaking to carry out work or services for someone whose status is not that of a client or customer. The difference is not always clear, and it is important to ensure that workers who deal with you or your business are clearly defined, so that you know what rights they have and how they should be treated.



An employment contract will usually be in writing, although it does not have to written and can be a verbal agreement or implied by the conduct of the parties involved.

Broadly, someone will be considered to be an employee if:

  • The person in question (the worker) has to do the work themselves and cannot provide a substitute to carry out the work on their behalf
  • The business involved is obligated to provide work and the worker must accept it
  • The business has some say over the way in which the work is done

If someone is an employee, payment for the work carried out will usually be by way of a salary and employees have the right not to be unfairly dismissed as well as to be paid a statutory payment if they are made redundant (provided they have been employed for a minimum period).


Contract workers

Contract workers can choose whether or not they accept work that is offered to them, and businesses are not obliged to provide them with work. The worker will only be required to work for the business for as long as it takes to complete the contract and can carry out the work where they wish, and when they wish.

They are not entitled to claim unfair dismissal or redundancy pay. Another worker can be substituted for them, meaning they are not always required to show up and do the work themselves, but can instead arrange for someone else to stand in for them, to carry out the work.

Contract workers will issue invoices for the work they carry out and may work for other businesses at the same time. They will deal with their own tax payments.


Risks in not knowing the difference between an employee and a worker

If you are concerned that someone who you are treating as a worker may have employee status, you may want to seek expert legal advice from an employment lawyer, so that you can be sure of your duties and can avoid falling foul of employment law. Making an error of this kind could be expensive if you inadvertently employ an individual, particularly if the situation lasts for a long period of time.

The increase in the gig economy has caused difficulties for businesses who never intended to employ individuals, but who took on individuals on what was meant to be a self-employed contractor basis.  In some instances, these workers have established that they have employment status, meaning they are able to enforce rights against their employers – even if the business in question is not aware that they are employing someone.


Contact us

If you are concerned about the status of the workers whom you deal with, and would like to speak to one of our experts in our Employment Law team, please call us on 01252 733 770 or email us at