Glossary
Deemed employee
A contractor treated as an employee for tax purposes under IR35 — PAYE applies, but no employment rights.
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A "deemed employee" is a contractor whose engagement falls inside IR35. They're treated as an employee for tax purposes — income tax and Class 1 National Insurance are deducted via PAYE — but they don't get any employment rights (holiday pay, sick pay, statutory protections).
The deemed employer (typically the fee-payer in off-payroll situations, or the contractor's own PSC under original IR35) operates PAYE on the deemed employment payment.
Related terms
- IR35 — The UK's off-payroll working rules — they decide whether a contractor should be taxed as a deemed employee.
- Inside IR35 — An engagement that falls within IR35 — the contractor is taxed as a deemed employee.
- Off-payroll working (Chapter 10) — The 2017/2021 IR35 rules putting the responsibility for IR35 status on the client, not the contractor.
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