By Jo Seery, Professional Support Lawyer
The much-awaited consultation on employment status has finally been published. While it is not quite the wide-ranging consultation we have been expecting, given the Labour Party’s manifesto commitment to introduce a simpler two-part framework, it is clear in its aims and purpose, namely, to tackle bogus self-employment.
Employment rights currently depend on three categories of employment status: employees, who benefit from the full range of employment rights, including the right to claim unfair dismissal; workers (sometimes referred to as limb (b) workers, referencing the statutory definition), who qualify for the right to holidays and the National Minimum Wage (NMW); and the self-employed, who have very limited employment rights.
As the consultation points out, employment status is inherently complex, making it difficult for individuals to understand what employment rights they have. Previous government attempts to review employment status have all failed to deliver, and the position has become more complex as new business models have developed in the intervening years. The Government appears to be taking a two-step approach, promising to “consider creating a single status of worker as a longer-term goal”.
The focus of this consultation is on addressing those practices which seek to classify individuals as self-employed in order to avoid statutory rights to the NMW and paid holidays through the use of substitution clauses (bogus self-employment).
Key amongst the proposals for changing the test to determine worker status is a shift in focus away from personal service and instead towards the control an employer exercises over the worker. This should, in practice, reduce the impact of substitution clauses when establishing worker status. To bolster this new approach, the Government proposes that where there is a dispute as to whether someone is a worker, which proceeds to an employment tribunal, there will be a ‘presumption of worker status’. This means that the burden will shift to the employer to prove that an individual is not a worker. Employers who persistently misclassify their workforce will also be at risk of a financial penalty, as this will be treated as an aggravating factor under existing provisions which empower tribunals to impose penalties.
The consultation also clarifies the circumstances in which the Fair Work Agency may support tribunal claims, for example when someone has been underpaid wages because of a dispute about their employment status.
As part of its aim to ensure that employment protections reflect the realities of modern working arrangements and are more effectively enforced, the Government also seeks views on strengthening protections for the self-employed. Amongst the proposals are the right to a written statement, safeguards against blacklisting and enhanced health and safety protections.
The consultation, while falling short of what was expected, does present an opportunity for trade unions and worker representatives to address some longstanding concerns about bogus self-employment and secure employment rights for those who are, in truth, workers. The consultation closes on 8 January 2027.