Is this person an employee, a worker, or genuinely self-employed?

England and Wales: This page sets out the position in full. Scotland: the same position, with no difference in principle — employment law is reserved, so the same statute applies, and the tax rules are UK-wide. Northern Ireland: the same three-way test, word for word, in Northern Ireland’s own Employment Rights Order; the tax rules are UK-wide, but claims go to Northern Ireland’s separate industrial tribunals, where the English case law persuades rather than binds.

Two legal tests, two forums, two possible answers

One set of facts about one person can produce two different legal answers. This step is for the trustees or manager engaging someone, with their accountant. It usually follows costing the post, because the answer changes the cost. The same tests apply in England and Wales, Scotland and Northern Ireland, though Northern Ireland’s claims go to its own tribunals.

• The tax question is whether HMRC treats the person as employed for tax and National Insurance. HMRC’s free Check Employment Status for Tax tool, CEST, gives HMRC’s view.
• The employment-law question is whether the person has employment rights — holiday pay, the minimum wage, protection from unfair dismissal. An employment tribunal decides that, on its own tests.

HMRC says CEST is about tax. It will stand by a CEST result where the information you gave was accurate and you used the tool in line with its guidance. It does not say the result settles anything, and it says nothing about employment rights at all.

So a “self-employed” CEST result is no defence to a claim that the person was a worker. A tribunal will look at what happened between you in practice, not at the label or at the tool’s output. Keep both answers on file, and never treat the first as the second.

There are three categories, not two

Most people think in two boxes: employee or self-employed. The law has three, and the middle one is where charities get caught.

• Employee. Someone who works under a contract of employment. They have the fullest set of rights.
• Worker. A worker is someone who has agreed, under any other contract, to do work personally for you, where you are not their client or customer. Workers get holiday pay and the minimum wage, even though they are not employees.
• Genuinely self-employed. Someone running their own business, for whom you are one customer among others.

The worker test is in the Employment Rights Act 1996, s.230(3)(b), and the National Minimum Wage Act 1998 uses the same words. The Equality Act 2010 has its own, similar test in s.83(2)(a).

Each of these is contract-gated. For employment rights generally, and for the Equality Act, status needs a contract — with one narrow statutory exception for whistleblowing, under ERA s.43K. That is also why a volunteer with no contract is not a worker. It is also why deciding whether a role is a volunteer role or a job turns on the same question.

Northern Ireland uses exactly the same three-way test. Article 3 of the Employment Rights (Northern Ireland) Order 1996 repeats s.230 word for word. What differs is the forum: claims go to Northern Ireland’s own industrial tribunals. The leading English cases on status carry weight there, but they persuade rather than bind.

IR35: charities are private sector, and almost all are small

IR35 — the off-payroll working rules — is the tax question for someone who works through their own limited company. It is where charities most often worry more than they need to.

The rules are statute: the Income Tax (Earnings and Pensions) Act 2003, Part 2, Chapter 10 (ss.61K–61X). The test of whether a client is small is in ss.60A–60G, and “small” is taken from s.382 of the Companies Act 2006. HMRC’s pages are guidance on that statute, not the rules themselves.

Two points take most charities out of the difficult part.

Charities are private sector. HMRC’s guidance says so in terms, verbatim: “Private sector includes voluntary sector organisations, such as some charities.” That holds even when most of a charity’s money comes from public bodies.

Almost every charity is a small client. For a small private-sector client, the duty to decide status stays with the worker’s own company, not with you. You must still confirm your size if you are asked. The size line sits far above the income of almost every charity. So for most readers that is the end of the IR35 question.

A charitable company is tested like any other company, on the small-companies criteria. For a CIO, the answer is less settled.

HMRC’s own manual sorts clients into two groups. Companies are tested on the full criteria. Other organisations are tested on turnover alone. A CIO is not a Companies Act company, so on this guide’s reading of the manual it falls in the turnover-only group.

But HMRC does not name CIOs anywhere we have found. Treat that as a reading of the manual, not as HMRC’s stated view, and say so if you rely on it.

The turnover figure for that group is itself contested. The statute and HMRC’s guidance point to different figures, so this page prints none. For companies, the size figures change from the 2027/28 tax year.

The question that costs money is the other one

IR35 is mostly a comfort for charities. Employment status is not.

Get it wrong and the person can claim the rights they should have had. Those are holiday pay, minimum wage arrears, pension contributions and, for an employee, unfair dismissal.

Unfair dismissal is the largest single type of claim that reaches tribunals in Great Britain — 23% of claims received in January to March 2026. That figure covers all employers. No official breakdown for charities or small employers exists, and Northern Ireland’s tribunals are not included.

The label in the agreement does not decide it. Tribunals look at the reality. They ask whether the person must do the work themselves, and whether you must offer work and they must accept it. They also ask how far you control how it is done. A “freelance” agreement that reads like a job description will be read as one.

Make the decision, and write it down

For each engagement, record two answers and your reasons.

1. The tax answer. Run CEST with accurate facts and keep the result. If the person works through their own company, record that the charity is a private-sector client and whether it is small.
2. The employment-law answer. Employee, worker or self-employed. Record the facts that point each way: personal service, obligations on both sides, control, and whether they run a business of their own.

Revisit it when the arrangement changes. A freelancer who drifts into regular hours, fixed tasks and a charity email address may have changed category without anyone deciding it. Once the answer is “employee”, the next step is to register as an employer and set up payroll.

Common mistake: treating a CEST “self-employed” result as settling employment status

One official-looking answer feels like the whole answer. CEST gives HMRC’s view for tax only. Unfair dismissal, holiday pay, minimum wage and redundancy rights are decided separately by tribunals, and a CEST result is no defence to a worker-status claim.

Common mistake: worrying about IR35 as if the charity were a public-sector client

Substantial public funding makes a charity feel public-sector. HMRC treats charities as private sector, and almost every charity is a small client. Responsibility for status then stays with the worker’s own company — though the charity must confirm its size if asked.

Common mistake: assuming someone who is not an employee has no employment rights

The employee-or-self-employed choice leaves out the middle. Worker status carries holiday pay and minimum wage rights without employee status. Every one of these categories turns on a contract, and the tribunal looks at the reality rather than the label.

Worked example

Saltmarsh Trust engages a freelance fundraiser through her own limited company. Its trading subsidiary wants to use her too.

The tax answer. Saltmarsh is a charity, so it is a private-sector client for off-payroll purposes. As a charitable company it is tested on the small-companies criteria. If it is small, the duty to decide her status stays with her company, and Saltmarsh only has to confirm its size if asked.

Whether the subsidiary, as a separate company, answers the size question the same way was not established here. That is a question for Saltmarsh’s accountant.

The employment-law answer. This is separate, and CEST does not answer it. Suppose Saltmarsh sets her hours, gives her fixed tasks and expects her to do the work herself. Then she may be a worker whatever her contract says.

Saltmarsh records both answers, with the reasons, in a written determination for this engagement — and a separate one if the subsidiary engages her.