Employment Status

What Is Employment Status?

In the United States, employment status is a general term referring to the relationship between an employee and their current or former employer. It is also used in Medicare regulation. Outside of the United States, most recognizably in Canada, employment status can refer to a formal legal classification for the relationship between an employer and an individual who provides labor or services to (or on behalf of) the employer. 

Employment Status in the United States

In the United States, the term employment status appears not to be as strictly defined as it is elsewhere. In general, U.S. organizations use employment status to refer to the type of implied or written contract between the employer and employee, e.g., full-time employment, part-time employment, temporary or contract employment, or an internship or apprenticeship. The reason employment status is not as strictly defined is that U.S. employees’ rights remain consistent no matter how they are employed. The only exception is that companies employing more than 50 full-time employees must provide some form of healthcare option according to the ACA.   

One specific, less-common usage of employment status can be found in Medicare regulation, where current (i.e., employed) or non-current (i.e., unemployed) employment status determines whether Medicare is the primary or secondary payer of health insurance claims made by the employee or their spouse. 

The U.S. Internal Revenue Service does not make distinctions among the various statuses of employment. They simply classify workers as employees or non-employees (i.e., self-employed contractors) for tax purposes. This classification is based on three criteria:

• Relational: The presence of an implied or written contract, benefits, or other elements linking the employer to the employee

• Financial: The presence of a specific wage or salary

• Behavioral: Whether the employer has control over how the work is performed

If one of the above criteria is not met, the IRS considers the person doing that work a non-employee. The most common form of non-employee worker is an independent contractor, but there are others, which you can read more about here: Types of Non-Employees

Employment Status in Other Countries

In Canada, and possibly in other countries, employment status designation determines the rights that an individual is guaranteed as a condition of their employment. Depending on the work they perform and how, they typically fall into one of three categories:

• Worker

• Employee

• Self-employed

In countries following this definition, employment status also dictates the responsibilities of the employer to the individual performing the work, which is why it is important for an employer to know the guidelines that determine employment status and the status of all the people working for them. 

Similar to in the U.S., an individual is determined to be an employee based on the extent of their relationship with the employer. They must have an implied or written contract, they must be obligated to do whatever work is being done themselves (they cannot outsource their work), and the employer must have the ability to control the way in which the work is performed. 

Worker status is a more basic employment status, and it covers any individual who works for another person or organization, whether casually or with a written or implied contract. Workers’ rights are more basic than an employee’s rights, but more extensive than the rights of someone who is self-employed. 

Self-employed individuals are granted the fewest rights, as they are essentially both the employee and the employer, and therefore obligated only to themselves. Like in the U.S., self-employed workers may be under contract, but whoever is paying for the work has no right to control how the work is being done. 

You can read more about these three types of employment status and the rights provided by each here: Employment Status in Canada