Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or tax advice. For guidance or advice specific to your business, consult with a qualified professional.
It’s important to know about the types of workers that exist, whether you’re hiring your first employee or rethinking your existing team’s needs.
As many owners try out new ways of doing business, like offering delivery or click-and-collect for the first time, those operational changes influence what staff you need. Understanding who you can hire can also help you calibrate your staffing needs to changing customer demand.
The good news is that you have a lot of options when bringing on new team members, and you can also bring on a few different types, depending on where your small business is headed. This primer on the types of employment will help you make a more informed decision when figuring out who to hire this year.
What to consider when thinking about different employment types
Understanding the difference between employees, freelancers and contractors, temporary and permanent staff is the first step because it not only impacts the taxes you pay and the benefits you offer, but it will also help you figure out who you need to bring on. Once you nail that down, you can also start thinking through your hiring budget.Before going through this list of worker types, ask yourself a few questions to figure out the different kinds of staff your business might need this year.
- How long do you need help?
- How many hours do you need this person to work?
- What kind of skills should they have?
- How does that compare with the rest of your team, if applicable?
- If temporary, will you eventually need someone more long term?
- Are you planning on hiring them yourself or using a staffing agency?
These questions will help you compare your needs with the nuances of each type of worker, so you can decide who will work best for your business.
Different types of employees
When you take on staff their employment status affects their rights and your employer responsibilities. Rights and responsibilities vary depending on whether you employ someone as a casual worker, employee, contractor or freelancer.
Employees may be full or part time, temporary or permanent. They have an employment contract and additional rights that don’t apply to casual workers.
Consider this option if you want to establish a long term relationship with a member of staff, build trust and commitment, need to invest time or money in training them and you are sure you have enough work for them on a long term basis or for a set period.
Someone is generally classed as an employee if they are:
- required to work regularly other than when they are on sick leave, maternity leave, paternity leave or holiday
- expected to work a minimum number of hours
- have a manager or supervisor who is responsible for them
- can’t send someone else to do the work in their place
- get holiday pay
- are entitled to sick pay, maternity or paternity leave
- can join the company’s pension scheme
- have materials, tools and equipment for their work provided by the business.
It is important to be sure whether you should classify someone as an employee or not. You may need professional advice.
Even if you and/or they don’t consider them an employee, in employment or tax law they may be classified as one. If they are officially seen as an employee they have specific rights and entitlements that must be met.
Rights that employees have over and above those classed officially as ‘workers’ may include:
- sick pay
- maternity, paternity, adoption and shared parental leave
- minimum notice periods if their employment is going to come to an end
- protection against unfair dismissal
- a right to request flexible working
- redundancy pay
- access to a company pension
Some of these rights only come into effect after a minimum period of employment.
You can take on staff on a temporary or casual basis when you have specific short-term work that needs to be carried out. This is sometimes a good option for seasonal work such as farm work. You may employ temporary workers directly or via an agency.
A person who is officially classified as a ‘worker’ has less rights than an ‘employee’ and there are fewer responsibilities on you as an employer. Workers do still have many rights though and it is important to ensure you fulfil all your obligations.
You might consider hiring an apprentice for an extra pair of hands. One of the great benefits of hiring an apprentice is that you can train them to work exactly as you require.
Apprentices are aged 16 or over and combine working with studying.
You must have experienced staff available to work with your apprentice. Apprentices need to be enabled to learn job specific skills and be given time for training or study. This needs to be at least 20 percent of their working week.
Apprentices must be paid at least minimum wage.
Arrangements differ slightly in England, Wales, Scotland and Ireland.
Gov.UK offers further advice about employing an apprentice
You may decide to hire freelancers — also known as self employed workers or contractors — usually for short-term or one-off projects.
Self employed workers aren’t paid through your business PAYE payroll and don’t have all the same rights as employees.
Someone usually classifies as self-employed / freelance if most of the following apply, they:
- make a profit or loss for themselves and run their own business
- have control over when they work
- can choose to hire someone else to do the work via subcontracting
- provide their own tools to do the work
- can work for more than one client
What next after you have decided on the best type of worker for your business?
One of the greatest keys to success for any growing business is to hire good employees.
Work out what kind of worker employee status is most likely to fit your needs and budget and then you can get on with hiring your first employee.
Regardless of their employment status, give some thought to your onboarding process for new hires, to ensure they can help your business reach its next milestones.