Self-Employed or Employed? How to Know What You Actually Are

‍‌‌​‌‌​​‌‌‌​‌‌‌​​‌​‌‌‌‌‌​​​‌‌‌​‌‌‍# S7. Self‑employed vs employed - know what you actually are before you start

You can't afford to guess this. Your status decides your rights, your tax, and how badly you get burned if something goes wrong.

1. THE SHORT VERSION

If you're employed, you get holiday pay, some sick pay, notice, redundancy and protection from unfair dismissal (after a while).

If you're self‑employed, you're basically your own business: no holiday or sick pay, you invoice, you chase money, and your protections are thin.

IR35 is about people working through a company but acting like employees – HMRC can tax you like an employee even if everyone calls you a "contractor".

The label on your contract doesn't decide your status. What actually happens on site does.

2. THE THREE MAIN STATUS TYPES (PLUS LTD/IR35)

The law splits people into three main types. Construction uses all three.

Employee You work under a contract of employment – usually PAYE, regular hours, strong control by the employer. You get the full set of employment rights: holiday pay, minimum wage, sick pay (if you qualify), redundancy (after 2 years), unfair‑dismissal protection, notice, pension auto‑enrolment.

Worker Halfway house between employee and self‑employed. Common for agency and casual work. You get minimum wage, holiday pay, rest breaks and some protection, but not redundancy or full unfair‑dismissal rights.

Self‑employed You run your own show: you invoice, set some of your own terms, and carry the financial risk. You get health and safety protection and some discrimination/whistleblowing protections, but no holiday pay, no sick pay, no redundancy, no unfair‑dismissal rights from the client.

Ltd company / IR35 You work through your own limited company or similar, usually on day rates. IR35 decides if you're "inside" (taxed like an employee) or "outside" (taxed like a true business). Inside IR35 often means tax like an employee but no employment rights from the client.

3. SNAPSHOT TABLE - MONEY AND RIGHTS

This is the bit you'll feel in your wallet.

If you're carrying self‑employed risk for worker‑level money and control, you're on the wrong end of the deal.

4. SIMPLE TESTS: WHAT YOU REALLY ARE

Forget what the contract is labelled. Answer these honestly.

Test 1 - Who controls your day? They tell you where to be, when to start/finish, what tasks to do and how to do them, move you around like staff = employee/worker flavour. You quote for work, agree the outcome, and have real say over how it's done (within safety and spec) = more self‑employed.

Test 2 - Can you send someone else? They hired you personally, wouldn't accept a substitute = strong employee/worker sign. You can send another qualified person from your team and they're fine with it = contractor/self‑employed sign.

Test 3 - Who carries the risk? Fixed hourly/day rate, no chance to profit from being efficient, no real risk of loss = employee/worker. You price jobs, can earn more by working smart, may have to fix screw‑ups in your own time = self‑employed.

Test 4 - How are you paid? Through PAYE, tax and NI off at source, payslips from employer/agency = employee/worker. You invoice, get paid gross (maybe CIS deduction), then file a tax return = self‑employed / company.

Test 5 - Are you "part of the furniture"? Same site, same company, long‑term, on company rotas, using their processes = looks like staff, even if they shout "self‑employed". You jump between clients, choose jobs, and there's no promise of ongoing work = more self‑employed.

If most of your answers land in the first column, you're probably a worker or employee in law, even if the paperwork pretends you're not.

5. CONSTRUCTION‑SPECIFIC TRAPS (AND HOW TO SPOT THEM)

Trap 1 - "You're CIS so you're self‑employed" CIS is a tax scheme, not a status guarantee. Government has called out false self‑employment in construction – CIS used to dodge NI and rights while treating people like employees. Spot it: you're on CIS, but: one firm, long‑term, fixed hours, take orders like staff, no chance to send a sub. That's a classic false self‑employment pattern.

Trap 2 - "Self‑employed" but you look exactly like staff You wear their PPE/uniform, use their kit, follow their rotas, get told off in the same way as PAYE staff. ACAS and government guidance are blunt: status is about reality, not labels. Tribunals have re‑classified "self‑employed" people as workers or employees many times. Spot it: if you'd struggle to explain how your working life is different from the PAYE lads next to you, chances are the law won't see much difference either.

Trap 3 - Agency "self‑employed" that's really worker status Agency pays you on PAYE, sends you to sites, can move you around. You don't set your own client list. In law, that's usually at least worker status, sometimes employee, with rights to holiday pay, minimum wage, rest breaks and protection for raising H&S issues. Spot it: if they deduct tax/NI like an employer and manage you like staff, don't swallow "you're just self‑employed" at face value.

Trap 4 - Umbrella companies you don't really get You sign an umbrella contract, then your payslips are full of deductions you don't recognise: margin, employment costs, "rolled‑up holiday". You're usually legally an employee of the umbrella, but day‑to‑day you feel like a temp with no clear point of contact for rights. Spot it: if a company you've never heard of is on your payslip as your "employer", you're under an umbrella. You need to know who they are and what you're entitled to.

Trap 5 - IR35 "inside" with no upside You work through your own Ltd. Client says the role is inside IR35. Tax is taken like PAYE, but the client still calls you a contractor when it suits them. Result: you get hit with employee‑like tax, but don't get holiday, sick pay, or job security from the client. Spot it: inside‑IR35 contract that runs like a staff role, but when you ask about rights, they say "you're not an employee, you're just a contractor".

6. REAL‑LIFE PATTERNS YOU'LL RECOGNISE

Example 1 - CIS bricky on the same site all year You're on CIS with a main contractor, same site 10 months, 7:30–4:30, you use their scaffold and materials, site manager directs your day, you can't send someone else. For tax, they treat you as self‑employed under CIS. For employment law, this looks very worker/employee: high control, ongoing obligation, no genuine substitution. If they ditch you with no holiday pay after a year, you may have an argument that you had more rights than they admitted.

Example 2 - Agency labourer on PAYE You sign with an agency, they deduct tax/NI, send you to different jobs. You can decline some shifts, but mostly you go where they put you. ACAS would usually see you as a worker, sometimes employee if it's regular and long‑term. That means holiday pay, minimum wage, rest breaks and protection if you're punished for raising safety concerns. If holiday pay never appears, that's something to raise.

Example 3 - Ltd company site manager on a big job You've got your own Ltd. You sit in the client's office, run their programme, manage their staff, obey their policies. On IR35 tests (control, mutuality, integration, substitution), that often lands inside IR35. You're taxed like an employee, but if they end the contract tomorrow, you don't get redundancy or unfair‑dismissal rights. The rate has to be high enough to cover that risk, or the maths doesn't work.

7. BEFORE YOU SAY YES - 5 QUESTIONS TO ASK

This is your screenshot‑friendly bit.

1. "Am I on PAYE, CIS, or my own Ltd?" PAYE = employee/worker. CIS/Ltd = self‑employed/contractor territory.

2. "Do I get holiday pay?" "Yes" usually means employee/worker. "No" with high control is a warning sign.

3. "Who sets my hours and where I work?" If it's all them, and you're treated like staff, you look more like employee/worker.

4. "Can I send someone else instead of me?" If the honest answer is "never", that points away from genuine self‑employment.

5. "Can I work for others at the same time / turn work down?" If the real answer is "no, not really", the relationship is employment‑like, whatever they call it.

8. IF YOU THINK THEY'VE GOT YOUR STATUS WRONG

• Write down how it really works: hours, control, pay method, ability to refuse work, whether you can send a sub.
• Compare that to ACAS and GOV.UK status guidance - not the agency brochure.
• If it still looks off, speak to ACAS, a union, or a free advice service before you go nuclear. They can tell you if it's worth pushing and how.

PAYE vs SOLE TRADER vs LIMITED COMPANY - IN ONE GLANCE

WHAT TO DO NEXT

• Before you accept any work, ask: am I PAYE, CIS, or working through my own company?
• Use the GOV.UK Check Employment Status for Tax (CEST) tool to get a steer on your status.
• If you think your status is wrong, write down how the work actually operates day to day and compare it to ACAS guidance.
• If you are being treated like an employee but labelled self-employed, speak to ACAS or a union before signing anything.
• Read S8 and S9 if you are going the self-employed route, so you set up properly from the start.

SOURCES

• Employment Rights Act 1996. https://www.legislation.gov.uk/ukpga/1996/18
• Income Tax (Earnings and Pensions) Act 2003. https://www.legislation.gov.uk/ukpga/2003/1
• GOV.UK – Check employment status for tax. https://www.gov.uk/guidance/check-employment-status-for-tax

How this site is funded →

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

In crisis? Samaritans 116 123 · Mental health support

How this site is funded →