An employee is a person who works under a contract (written, verbal or implied) of service or apprenticeship with an employer. Generally, a person is also defined as your employee if:

  • you deduct National Insurance contributions and income tax from the salary you pay them
  • you control when, where and how they work
  • they are not authorised to employ a substitute when unable to work.

The director of a Private Limited Company is still considered an employee if the company deducts income tax and NI contributions and they own less than 50% of the business. A family member who works for you may not be classified as an employee if your business is not a limited company.

One of the main determining factors as to whether someone is an employee or self-employed is the amount of control that an employer has over them. A person can be considered an employee when his employer has a certain level of control and direction over how he works. Someone who is self-employed may provide services for an employer, but the employer has less control over the means and methods of the work achieved.

You can find more detailed information about the definition of an employee here. If you are not sure about the employment status of an individual within your business, you should seek professional advice.