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Employment Status

Employment status is a general term describing the relationship between a person and their former or current employer. In the US, "employment status" is not a legal term. However, in Canada, for example, the expression has a legal bearing. 

The Meaning of Employment Status in the US

The Internal Revenue Service (IRS) doesn't distinguish between employment statuses. The important factor for the authorities is whether a person is a worker for the business or a contractor. Such classification depends on three criteria and defines the worker's tax situation. 

Financial Criteria

It defines whether there is an exchange of wage or salary between employer and employee. There isn't a distinction between a fixed salary and hourly wages in this case. 

Behavioral Criteria

That category describes whether the employer controls how the work is done. The control can involve general guidelines or full-scale supervision of the process. Self-employed contractors typically have more freedom over how they conduct their business with companies that hire them. 

Relational Criteria

Is there an implied or written contract between employer and worker? The relational category involves details like benefits, deductions, and employer contributions too.

The term employment status in the US, in general, isn't as strictly defined as in other countries. When businesses talk about employment status, they can be referring to both official contractual obligations and spoken agreements. For that reason, there isn't precise terminology attached to "employment status."

Nevertheless, some terms that you can hear concerning "employment status" include:

  • Full-time employment
  • Part-time employment
  • Contract employment
  • Temporary employment
  • Internship
  • Apprenticeship

The reason legislators and businesses don't bother codifying employment status is the level of protection US workers typically enjoy. Employees' rights in the United States are consistent regardless of the type of employment. The part-time hourly wage worker has the same rights as a full-time salaried employee. Employees' obligations depend on the line of business and the company's internal guidelines. However, everyone enjoys protection by federal, state, and local legislation in case a firm goes over the line.

Medicare is probably the only avenue in which employees might expect different rights depending on the company they work for at the moment. The difference, however, has nothing to do with their employment status. Instead, it's because, according to federal law, all companies with 50 or more full-time employees need to offer some health insurance.

Employment Status outside the US

Countries like Canada have much better-defined employment statuses for their workforce. The reason is that people with different employment statuses enjoy varying privileges. The three main types of employment status in Canada are:

  • Self-employed
  • Employee
  • Worker

Self-employed

Self-employed people run their own businesses. They get hired by companies or individuals to do a job. Contractors, as we call them in the US, don't enjoy employee benefits like:

  • Paid holidays
  • Sick leave
  • Personal days

When contacted to do a job, they give estimates (quotes) about how much the work will cost and submit invoices once they are finished. Then, before starting each task, they sign contracts with the person or company hiring them. The document details the specifics of the project, all obligations, and deadlines. 

Employee

Anyone with an employment contract has the status of an employee. Such people enjoy the most privileges compared with individuals with other employment statuses. In addition to all benefits, protections, and rights that cover the working force as a whole, they get:

  • Paid holidays
  • Sick leave
  • Personal days
  • Overtime pay

Employees generally have to work a fixed amount of hours. They also agree to show up for work according to the business's schedule at an arranged time. Employees are subject to redundancy actions. The financial security and opportunities for career growth make the "employee" employment status the most attractive to people who aren't interested in running their own business. 

Worker

"Worker" is somewhat casual employment status. A "worker" is anyone who carries out work or provides services. They don't have the right to subcontract the work to other people or businesses and don't have paid sick leave. Workers can't work as a limited liability company. Some benefits this employment status comes with include:

  • Protection against discrimination
  • Payslips
  • Paid holiday
  • Guaranteed national minimum wage