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Government decides against legislation to clarify employment status

  • United Kingdom
  • Employment law

26-07-2022

The Government has decided against reforming employment legislation governing employment status, preferring to publish new guidance. This means that the current three-tier approach of employee, worker and independent contractor will continue unchanged.

Background: employment status reform proposals

In 2017 Matthew Taylor’s report, ‘Good work: review of modern working practices’, made a number of recommendations to the Government in relation to employment status, including that it should:

  • retain the current three-tier approach to employment status, but rename workers as ‘dependent contractors’
  • clarify the difference between workers and those who are legitimately self-employed
  • update status legislation to improve the tests for employment status
  • better align the employment status framework with the tax status framework

In 2018, the Government consulted on the Taylor recommendations and has now published its response to that consultation. In summary, it recognises that the boundaries between employee, worker and contractor can be unclear. However, now is not the time to act given the risk of creating unacceptable cost and uncertainty for businesses during challenging times.

In addition, it notes that there is no consensus on how to reform status legislation and there is no easy solution.

New status guidance

Employers may find useful the new Government guidance issued alongside the consultation response which aims to provide “enhanced detailed guidance to help people work out which category they fall into and to demystify case law”. It has also updated its ‘Calculating the Minimum Wage’ guidance to add a section on gig workers, including describing times that are likely to count as ‘working time’ for such workers.

Practical implementation

It is no surprise that that the Government has declined to act on changing employment status legislation given the complexities and challenges involved. However, despite the newly published guidance, it leaves employers and workers with the sometimes difficult task of understanding whether a particular role is one for a contractor, a worker or an employee, a decision further complicated by tax considerations.

Link to the Government guidance: Employment status and employment rights: guidance for HR professionals, legal professionals and other groups - GOV.UK (www.gov.uk)