Employed or Self-Employed?
People who work for different employers at the same time are often not able to distinguish whether they work as self-employed or employed.
To find out if you work as an employed or self-employed person, it is necessary to determine whether you work under contract for service or contract of service. Contract for service means that you work as a self-employed and contract of service means that you work as an employed person. HMRC emphasises that your employment status is the actual legal relationship between the contract parties and is not just a matter of choice. As such, the legal distinction between contract for service and contract of service is crucial.
The below questions help to determine the nature of your employment contract:
Contract of Service (Employed)
If all your answers to the below questions are positive, you certainly are employed, which means that you work on the basis of a contract of service
- Can someone tell you how to exactly fulfill your duties?
- Do you have to do the work yourself, without employing any other people?
- Do you have to work a set of hours per day, week or month?
- Can you be moved from task to task or workplace to workplace?
- Are you paid by the hour, week or month?
- Can you get overtime pay or bonus payment?
Contract for Service (self-employed)
If all your answers to the below questions are positive, you certainly are self-employed, which means that you work on the basis of a contract for service.
- Do you regularly work for a number of different employers?
- Are you paid for the job done regardless of how long it takes?
- Can you hire someone on your own expense to help you?
- Do you use your own equipment?
- Do you have to correct shortcomings and defects on your own?
- Do you risk your own money?
What are the practical consequences when you work as employed or self-employed?
- Self-employed are paid for the specific job done as contracted. Whereas employees regularly receive salaries and wages with accordance with their contracts of employment.
- Self-employed pay flat rate Class 2 NICs quarterly as well as Class 4 NICs and Income Tax on all earnings including profits from busines following the end of the tax year. Whereas employees pay their income taxes and NICs under the PAYE systems.