An employee is an individual engaged under an employment contract by a company or organisation. This contractual relationship defines various aspects of the employment, including remuneration, working hours, entitlements to paid leave, sick pay, and the notice period required for termination.
Key Elements of an Employment Contract
- Salary: Details of your compensation package.
- Working Hours: Your expected work schedule.
- Paid Holidays: Your entitlement to annual leave.
- Sick Pay: Provisions for illness-related absences.
- Notice Period: The duration of notice required to terminate the contract.
Determining Your Employment Status
It's crucial to understand that not all individuals working with a company are classified as employees. Freelancers, subcontractors, and gig economy workers (e.g., those working with Uber, Deliveroo) might not have the same employment rights or tax obligations as employees.
Criteria for Being Considered a Worker
- Flexibility in Work: You have control over your work schedule and methods.
- Tax Responsibilities: You are responsible for managing and paying your taxes, usually through a Self Assessment tax return.
- Substitution: You can be replaced or substitute yourself if unavailable for work.
If your status is ambiguous, consulting with your employer or a legal advisor is recommended to clarify your classification.
Taxation for Employees
For employees, the Pay As You Earn (PAYE) system automates tax and National Insurance contributions, directly deducted from your salary by your employer and forwarded to HMRC. However, certain situations may require you to file a Self Assessment tax return, including:
- Earning Untaxed Income: This could be from freelancing, property rental, investments, dividends, or foreign income.
- Claiming Tax Reliefs: If you're applying for specific tax deductions.
- High Income Child Benefit Charge: Applicable if you or your partner earns over £50,000 and you receive Child Benefit.
- Earnings Exceeding £100,000: Higher earners may have additional tax obligations.
Conclusion
Being an employee involves specific rights and responsibilities, both in terms of your role within a company and your tax obligations. Understanding the distinction between being an employee and other forms of work engagement is essential for compliance with employment law and tax regulations. For any uncertainties regarding your employment status or tax requirements, seeking professional advice is advisable to ensure you're meeting all your legal obligations correctly.
