It is not always possible to determine the employment status of an individual by simply running through a set of questions on a checklist.
The terms of the individuals contract may be writing, however unwritten but implied variations can affect the relationship between the person engaging the individual.
The courts and HM Revenue & Customs (HMRC) consider a series of different factors to determine employment status. You have to weigh up each and then apply them to consider each case in the round.
This checklist looks at each factor - at a glance:
| Factor | Self-employed | Employee |
| Personal service | Can provide own services, but may also sub-contract work, or bring in outside assistance. | Always provides his services personally. |
| Mutuality of obligation | May turn down work if he desires. | Obliged to do as employer requests. |
| Right of control | More likely to be in control of most aspects of the work done. | An employer may control "what", "how", "where" and "when" work is done. Highly skilled employees can also exercise "what" and "how" too. |
| Right of substitution | May sub-contract work, or bring in assistance. Depends on nature of work; an individual may be engaged because of their personal reputation or skill and no substitute will be acceptable. | It is rare for an employee to have the right to appoint a substitute. |
| Provision of own equipment | Will normally supply all tools and plant. | May sometimes supply own small tools or equipment. |
| Financial risk | Will quote on a job-by-job basis, or may incur loss if overruns, or if required to rectify defects in own time. | Little risk unless work directly relates to a bonus or commisision scheme. Or, if poor work affected appraisal for promotion or other benefits. |
| Opportunity to profit | Can profit if work is performed efficiently, or from re-charging and making a profit on materials. | May only profit under a bonus or incentive scheme. However, may benefit from tips, or payments from third parties. |
| Length of engagement | Generally a fixed-term or short-term contract. | Contract will generally be open ended after probation period (if any). |
| Part and parcel of the organisation | May become "a fixture" in that his work brings him to the company regularly, but acquires no additional responsibilities or privileges as a result. | Is capable of being promoted, or manages other staff. |
| Employee type benefits | Unlikely to be entitled to any type of benefits. May be invited to functions with other external suppliers. | Part of pension scheme, enjoy canteen or sports club facilities, car parking, attends staff functions. |
| Right to terminate contract | Generally only if other party is in breach. | Would normally give notice under specified contract term. |
| Personal factors | May be engaged because of skills, reputation etc. | Personal factors may be the reason for appointment. |
| Mutual intention | Stated intention may not be born out by facts of case. | If parties agree employment this may be persuasive. |
