Employment Status: Employee, Worker, or Self-Employed
UK employment law recognises three categories of employment status, and each carries different rights and obligations. Getting this wrong is one of the most common and costly mistakes activity providers make.
Employee
An employee has a contract of employment (written or implied), works under your direction and control, and is obliged to carry out work personally. Employees have the fullest set of rights:
- Protection against unfair dismissal (after two years' continuous service)
- Statutory redundancy pay
- Minimum notice periods
- Right to request flexible working
- Maternity, paternity, and shared parental leave and pay
- All the rights of workers (see below)
Worker
A worker is someone who has a contract to perform work personally but is not an employee. This category captures many people in the gig economy and might apply to some of your sessional coaches. Workers are entitled to:
- National Minimum Wage / National Living Wage
- Paid annual leave (5.6 weeks pro rata)
- Rest breaks
- Protection against unlawful discrimination
- Workplace pension auto-enrolment (if they meet the criteria)
Workers do not have protection against unfair dismissal, redundancy rights, or the full range of family-friendly leave.
Self-Employed
A genuinely self-employed person runs their own business. They invoice you for services, control how they deliver the work, can send a substitute, work for multiple clients, and bear financial risk. Self-employed contractors have very few employment law rights: essentially just protection from discrimination and health and safety coverage.
The critical point for activity providers is that you cannot simply choose to classify someone as self-employed. The classification depends on the reality of the working relationship, not the label on the contract. HMRC and employment tribunals look at the substance, not the paperwork.
Written Contracts and Statements
Since April 2020, all employees and workers are entitled to a written statement of employment particulars on or before their first day of work. This is not optional. The statement must include:
- Your name and the employee's name
- Start date and continuous employment date
- Job title and description
- Place of work
- Pay rate and frequency
- Working hours
- Holiday entitlement
- Notice periods
- Sick pay arrangements
- Pension arrangements
- Probationary period details
- Training requirements
Beyond the legal minimum, a well-drafted contract for an activity provider should also cover confidentiality, intellectual property (such as session plans and curricula you develop), social media use, safeguarding obligations, and any restrictions on working for competitors after leaving.
You can find template contracts from ACAS (free) or have one drafted by an employment solicitor (typically £300 to £500 for a bespoke template you can reuse).
National Minimum Wage and National Living Wage
You must pay at least the legal minimum to all employees and workers. The rates for 2025/26 are:
- National Living Wage (age 21 and over): £12.21 per hour
- 18-20 year olds: £10.00 per hour
- Under 18: £7.55 per hour
- Apprentice rate: £7.55 per hour
These rates are reviewed annually and typically increase each April. For activity providers, be careful about how you calculate hourly rates. If an instructor is paid a flat rate per session, you need to ensure that their effective hourly rate (including any preparation, travel, or administrative time required) does not fall below the minimum.
For example, if you pay a coach £40 for a two-hour session, but they also spend 30 minutes setting up, 30 minutes packing away, and 30 minutes travelling, their effective hourly rate is £40 / 3.5 hours = £11.43 per hour, which is below the National Living Wage for over-21s. You would need to increase their pay or reduce the unpaid time requirements.
Holiday Entitlement
All employees and workers are entitled to a minimum of 5.6 weeks' paid annual leave per year. For a full-time employee working five days a week, that is 28 days (which can include bank holidays). For part-time workers, the entitlement is pro-rated.
Calculating Holiday for Irregular Hours
Many activity providers employ staff on irregular hours, term-time only, or zero-hour contracts. Calculating holiday entitlement for these workers has historically been complex, but since the reforms that came into effect in April 2024, the method is clearer.
For workers with irregular hours or part-year workers (such as term-time-only instructors), holiday accrues at 12.07% of hours worked in each pay period. You can either allow them to take this as paid time off or pay it as rolled-up holiday pay (adding 12.07% to their hourly rate). Rolled-up holiday pay is now explicitly lawful for irregular-hours and part-year workers.
Whichever method you use, ensure it is clearly stated in the contract and that the worker understands how their holiday is calculated.
Statutory Sick Pay
If an employee or worker is too ill to work, they are entitled to Statutory Sick Pay (SSP) from the fourth qualifying day of illness. The current rate is £116.75 per week, payable for up to 28 weeks.
To qualify, the employee must earn at least the Lower Earnings Limit (£123 per week) and be ill for at least four consecutive days (including non-working days). You can offer more generous sick pay above the statutory minimum if you wish, and this should be detailed in their contract.
For small activity businesses, an employee's sickness can be operationally disruptive as well as financially impactful. Having a bank of trained cover instructors who can step in at short notice is a practical measure that keeps classes running and reduces the pressure to bring someone back before they are well.
Pension Auto-Enrolment
If you employ anyone, you are almost certainly subject to workplace pension auto-enrolment. You must automatically enrol eligible workers into a qualifying pension scheme and make employer contributions.
Who Must Be Enrolled
- Eligible jobholders: Aged 22 to State Pension age, earning more than £10,000 per year. Must be auto-enrolled.
- Non-eligible jobholders: Aged 16-21 or State Pension age to 74, earning more than £10,000, or aged 22 to State Pension age earning between £6,240 and £10,000. Can request to join.
- Entitled workers: Earning below £6,240. Can request to join but you do not have to contribute.
Minimum Contributions
The minimum total contribution is 8% of qualifying earnings, of which the employer must pay at least 3% and the employee pays 5%. "Qualifying earnings" is the band of earnings between £6,240 and £50,270 per year.
For a small activity business, the administrative requirements of auto-enrolment can feel disproportionate. The NEST pension scheme (National Employment Savings Trust) is a government-backed option specifically designed for smaller employers, with straightforward online administration and no setup costs.
Right to Work Checks
Before employing anyone, you must verify that they have the legal right to work in the UK. This applies to all prospective employees, regardless of their nationality or background. Failure to conduct right to work checks can result in a civil penalty of up to £60,000 per illegal worker.
How to Check
- Manual check: Obtain original documents from the Home Office's approved list (passport, biometric residence permit, or a combination of other documents), check they are genuine and belong to the person, and take a clear copy that you retain for the duration of employment and two years after it ends.
- Online check: Use the Home Office online right to work checking service (for people with biometric residence cards, permits, or eVisas). Record the date of the check and keep a copy of the online profile.
- IDVT check: Use an Identity Document Validation Technology (IDVT) service provider for British and Irish citizens. This allows a digital check without seeing original documents in person.
Complete the check before the person starts work, not after. Document the date of the check and keep records securely.
Disciplinary and Grievance Procedures
Even in a small team, disputes and performance issues arise. Having a clear, fair process protects both you and your employees.
ACAS Code of Practice
The ACAS Code of Practice on Disciplinary and Grievance Procedures is not legally binding, but employment tribunals take it into account when deciding cases. Following the Code protects you from claims of unfair dismissal. The core principles are:
- Investigate the issue thoroughly before taking action
- Inform the employee in writing of the specific concern
- Hold a meeting where the employee can respond and be accompanied by a colleague or trade union representative
- Allow the employee to appeal any decision
For activity providers working with children, certain issues (safeguarding concerns, for example) may require immediate suspension pending investigation. Make sure your disciplinary procedure covers this and that you understand the difference between suspension (a neutral act, not a punishment) and dismissal.
Zero-Hour Contracts
Zero-hour contracts, where the employer does not guarantee any minimum hours, are common in the activity sector. They offer flexibility for both parties, but come with specific obligations.
- You cannot require exclusivity: A person on a zero-hour contract must be free to work for other employers
- Workers on zero-hour contracts are still entitled to the National Minimum Wage, holiday pay, rest breaks, and protection from discrimination
- If a pattern of regular hours develops over time, the working relationship may in practice become one of employment with an implied minimum hours obligation, regardless of what the contract says
Zero-hour contracts work best for genuinely casual, irregular work. If you need someone for fixed sessions every week, a part-time contract with defined hours is more appropriate and provides more certainty for both parties.
IR35 and Off-Payroll Working
If you engage coaches or instructors through their own limited companies (personal service companies), the off-payroll working rules (IR35) may apply. These rules are designed to ensure that people who work like employees pay broadly the same tax as employees, even if they operate through a company.
For medium and large businesses (meeting two of: turnover over £10.2m, balance sheet over £5.1m, more than 50 employees), the responsibility for determining IR35 status falls on the engaging organisation. For small businesses below these thresholds, the responsibility currently remains with the contractor's personal service company.
However, regardless of who is technically responsible, if HMRC determines that a contractor working through a limited company is in practice an employee, there can be significant tax liabilities. If you regularly engage contractors via personal service companies, take advice on whether IR35 applies to those arrangements.
Key Takeaways
- Classify employment status correctly: the distinction between employee, worker, and self-employed is determined by the reality of the relationship, not the contract label.
- Issue written statements to all employees and workers on or before their first day.
- Pay at least the National Minimum Wage, calculated on total hours worked including setup and travel time where required.
- Provide 5.6 weeks' holiday pro rata. For irregular-hours workers, use the 12.07% accrual method or rolled-up holiday pay.
- Auto-enrol eligible workers into a workplace pension and contribute at least 3% of qualifying earnings.
- Conduct right to work checks before employment starts, and retain copies for the required period.
- Follow the ACAS Code of Practice for disciplinary and grievance procedures to protect against unfair dismissal claims.
- Be cautious with zero-hour contracts: they suit genuinely casual work, but regular patterns can create implied employment rights.
