07 December 2022
Employee or Contractor? Juggling Employment Status in Construction

Contracts in the construction industry can be a complicated business. The nature of construction, with fluctuating demand for specific projects, means that companies and individuals must continually understand and make use of different types of employment status. In this post, we’ll consider the various types of employment common to construction, how these are determined and the legal implications of how workers are classified.

Work this way

There are three main types of employment status used in construction:

  1. Employees work under an employment contract and, as such, are entitled to statutory employment rights such as National Minimum Wage and paid annual leave, as well as protection against unfair dismissal and minimum notice periods
  2. Workers generally have a contract or other arrangement to complete specific jobs and benefit from certain employment rights, like protection against unlawful deductions from wages, for the duration of this work
  3. Self-employed individuals are not covered by employment law because they are their own boss, in control of their own rights and responsibilities

What difference does it make?

Employment type determines – and is determined by – the relationship between employer and individual.

While giving up the rights and protections enjoyed by employees and workers, self-employed individuals are free to set their own timetable, use their own working methods, refuse work offers and leave a site without permission.

The implications of misclassifying someone as a self-employed contractor can be very expensive for a company. If an individual has been incorrectly categorised, this could, for example, give rise to claims for back payment of holiday pay and wages.

Indeed, an employment tribunal in 2020 found that two contractors, who had signed self-employed contracts and were then dismissed without notice, were in fact employees. The judge found that the two men, who had been working as if they were employees, were eligible for the same protection as employees.

So how is employment status determined?

The three main principles that determine the employment status of an individual are:

  1. Personal service ­
  2. Mutuality of obligation
  3. The company’s degree of control over the individual

Personal service refers to the responsibility of employees and workers to perform work personally. A self-employed individual will often (though not always) be able to send a substitute in their place.

Mutuality of obligation means that employers are obliged to provide a minimum level of work to employees, while employees, for their part, are obliged to carry out such work. Self-employed individuals have no such arrangement so can turn work down or might not be offered any. Things are more nuanced for workers, who sit somewhere between employed and self-employed.

Finally, an employee or worker has less control over how, when and where work is carried out. Self-employed individuals agree to provide services to a client but have a certain degree of freedom with regards to the process; providing their own uniform and equipment also helps indicate a self-employed contractor.

Anything else?

That’s not all. Other atypical workers include agency and casual workers.

Agency workers are individuals engaged by an employment business who complete work for a client on a temporary assignment. The agency worker does not enter into a contract with the construction company but will have various rights such as “Day One” and “Week 12” rights.

Casual workers are often flexible workers who supply their services in irregular or informal working arrangements, carrying out duties on an “as required” basis. Fittingly, casual workers cannot be placed in a single category; in theory, they can belong to any of the three employment status types.

Focus – here for you

Navigating the ins and outs of employment status is not always easy, especially in the construction sector where employer–worker relationships are not always obvious. While we know that the vast majority of companies are committed to treating their employees, workers and self-employed contractors fairly, issues do sometimes arise and that’s why it’s so important to have comprehensive insurance cover in place. For more information about our range of specialist construction products, please click here, call 0345 345 0777 or email