Employment Status: Government consultation response published

The Government has today published a response to its 2018 consultation on employment status.  The consultation sought views on how to make employment status rules for employment rights and tax clearer for individuals and businesses.   Today’s response recognises that the boundaries between different employment statuses can be unclear, but concludes that the benefits of creating a new regulatory framework are outweighed by the potential disruption of legislative reform.

Rather than propose a legislative route, the government has published new employment status guidance for employment rights, together with today’s consultation response.   The aim is that the guidance,  “will make it easier for individuals to work out their own status while ensuring that the employment status system remains flexible and continues to adapt to modern working practices”.

Consultation response

Key points to note from the consultation response include –

  • The government believes that the UK’s three-tiered employment status framework for rights (self-employed, worker and employed) provides the right balance for the UK Labour Market by allowing flexibility – for both employers and individuals – whilst ensuring workers in more casual employment relationships have core protections such as the minimum wage and the right to holiday pay.
  • The 2018 Good Work Plan committed to legislate to improve the clarity of employment status tests, and to work towards alignment between rights and tax. Since the Good Work Plan was published, the UK labour market has evolved, the country faces economic challenges due to the coronavirus pandemic and global economic uncertainty has led to increased costs for businesses.   As such, the government has concluded that the benefits of creating a new framework for employment status are currently outweighed by the risk associated with legislative reform.
  • The employment status guidance for employment rights, aims to increase transparency for individuals on their employment status, empowering them to claim the rights they deserve whilst providing enhanced clarity on what employers’ rights and responsibilities are.
  • The Government is also updating its ‘Calculating the Minimum Wage’ guidance to provide greater clarity for businesses and individuals on the correct legal interpretation of working time for National Minimum Wage purposes for platform workers.
  • To make it more difficult for unscrupulous employers to deny rights to individuals, the government has already extended entitlement to a written statement on day one of a job to workers to ensure they are aware of their rights and entitlements from the start of the employment relationship. Also, the penalty for an aggravated breach of this right has been increased to £20,000.
  • The Government recognises that whilst the employment status frameworks for rights and tax serve different purposes, there could be some benefits to greater alignment between the two systems. However,   it has decided that now is not the right time to bring forward proposals for alignment between the two frameworks. It will, in the longer- term, explore options to improve the employment status system for tax to ensure it is as clear as possible and usable for all parties.


The new guidance published today comes in three different parts –

According to the news release accompanying the guidance, the aim is that both business and workers will benefit from greater clarity over their employment status.   The guidance intends to bring together employment status case law into one place for business and individuals to access.  It aims to enable workers to understand the rights they are entitled to and also to clarify the rights that apply to gig economy workers, including national minimum wage and paid leave.

Although today’s detailed guidance from the government is a welcome development,   worker status issues remain a complex topic where getting it wrong can have significant and costly ramifications.    UK employers are likely to be glad to avoid the burden of revised regulation for now,  but will, no doubt, be monitoring whether the legislative approaches being implemented in other countries actually assist in removing uncertainty and inconsistency.      Of particular interest will be the progress of the draft EU Directive on Platform Work.  If enacted, this would provide for employment status to be determined using a set of clear criteria, give platform workers access to existing labour and social rights, improve enforcement of rights for platform workers and strengthen collective bargaining and social dialogue.     Our prediction is that employment status issues will remain a challenging topic for some time to come and could be an area where further UK regulation is eventually implemented.

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