UK employment law recognises three main categories: employees, workers and self-employed independent contractors. Employees benefit from the broadest range of rights, including protection against unfair dismissal and rights to family leave and pay. Workers have a narrower set of protections, including holiday pay and the national minimum wage. Self-employed independent contractors may have limited protection against discrimination and detriment for whistleblowing but generally do not benefit from employment rights. In the event of a claim, it is up to employment tribunals and courts to rule on someone’s status, relying on caselaw tests that have evolved over the years.
For tax purposes, the position is binary: individuals are either employed or self-employed. There is no intermediate ‘worker’ category.
The Labour Party has long argued that ambiguity within the current model has fuelled “bogus self-employment” with some individuals classified as self-employed independent contractors when they should instead be treated as workers. Its original manifesto commitment was to replace the three-category system with a simpler framework comprising only workers and the self-employed.
However, the absence of anything about worker status from the Employment Rights Act was striking. As time passed, it became unclear whether reform remained a priority and whether the government had the appetite to pursue it within a first term in office. Against this background, the government has finally launched a consultation on employment status.
The new plans are much narrower than those set out in Labour’s original election manifesto, although the government says it will still consider a single status of worker as a longer-term goal. The government is now seeking views on plans to:
- keep the existing framework of three categories for employment law purposes;
- keep the existing two-category tax framework (under which many workers are classed as self-employed for tax purposes);
- lower the legal test for worker status to reduce the emphasis on the need for personal service, bringing more people in scope of employment law protections;
- create a presumption of worker status by reversing the burden of proof;
- make clear that repeated failures to recognise employment/worker status could result in the award of additional penalties by a tribunal;
- explore deploying the Fair Work Agency’s powers to bring employment tribunal claims on behalf of individuals to determine their employment status;
- develop a new online assessment tool for employers and individuals to check likely employment status (similar to HMRC’s CEST tool for tax status); and
- bolster protections for self-employed independent contractors by, for example, requiring businesses to give basic written statements to self-employed individuals and extending certain blacklisting and health and safety protections to them.
Reduced emphasis on personal service and the right of substitution
Under the current legal tests, an individual does not need to commit to a minimum amount of work to qualify as a worker. They may also have worker status for a particular assignment even if they are not obliged to accept future assignments. However, they must be required to perform the work or services personally. A genuine, unrestricted right to appoint a substitute precludes worker status.
This personal service – or substitution - issue was decisive in the Supreme Court’s 2023 ruling on Deliveroo riders, which concerned trade union recognition. Because the riders had a genuine right (both contractually and in practice) to send substitutes, the Court agreed that they were self-employed independent contractors.
The consultation proposes giving less weight to personal service when determining worker status, but the government is not proposing to remove the personal service requirement altogether. Its preferred approach is to place greater emphasis on control, so that an individual could only fail the test at the personal service stage if there was neither personal service nor significant direction or control by the engager. Personal service would then be considered again when assessing whether the individual is in business on their own account./p>
Alternatively, the government could:
- legislate that a right of substitution does not override other factors pointing to worker status, or
- alter the meaning of personal service so that an individual who is able to substitute another equally qualified person is deemed to be required to give personal service.
The consultation also considers whether the ability to set or negotiate the rate of pay should be a key factor in distinguishing workers from self-employed independent contractors.
Finally, the government asks whether a common language for the three categories would improve clarity. Workers are often described as “limb (b)” workers because their status is defined in section 230(b) of the Employment Rights Act, but this terminology can be confusing.
Presumption of worker status
The consultation proposes introducing a presumption that an individual has worker status.
This would be achieved by reversing the burden of proof that applies in employment tribunal cases. Instead of individual claimants having to prove that they have worker status, the burden would be on the engager/employer to prove that they do not.
The presumption would only apply to worker status. There would be no similar presumption of employment status.
State enforcement
The consultation considers using the Fair Work Agency’s civil proceedings power to bring tribunal claims to determine status, for example where the agency suspects bogus self-employment but the evidence is not strong enough to issue a notice of underpayment of holiday pay or minimum wage. It is not clear whether the presumption of worker status would apply in cases brought by the Fair Work Agency, but presumably this is the intention.
New right to written statement if self-employed
The consultation revisits a proposal from the Labour Party’s original election manifesto to strengthen rights for self-employed individuals. Businesses could be required to provide each self-employed contractor they engage with a written statement setting out basic terms, including the scope of the work and payment arrangements.
The requirement might apply only where the contract value exceeds a specified threshold and only to businesses that engage self-employed contractors. Private individuals engaging someone such as a plumber would not be covered.
The consultation also considers extending certain protections to self-employed individuals, including safeguards against the blacklisting of trade unionists and health and safety protections.
Conclusion
If implemented, the proposal will clearly make worker status more likely in cases where the wider relationship already points away from genuine independent self-employment. Those reclassified as workers would gain a limited set of rights, including holiday pay and the national minimum wage.
The proposals are aimed squarely at tackling what the government calls “bogus self-employment”, particularly in the platform economy, where compliance concerns are greatest. The policy intention is clearly to steer those businesses away from self-employment models and towards worker-status arrangements. Although the proposals may initially appear less radical than the original manifesto commitment, they need to be seen in the context of the recent expansion of right-to-work checks and the planned introduction of the guaranteed-hours regime. The broader direction seems to be to require platforms and similar business to do more to combat illegal working as an immediate next step, then to bring more individuals within worker status and finally, where people regularly work above specified thresholds, require a more predictable employment arrangement.
However, although the consultation is expressly limited to employment rights and says only that tax policy is kept under review, it does not explain how the proposals would interact with the separate tax-status framework. It makes little sense to leave the tax implications unaddressed, particularly as more individuals could be workers for employment law purposes while remaining self-employed for tax. The consultation also fails to grapple with any of the very practical considerations arising from extending rights such as holiday pay and the minimum wage to individuals with highly flexible working arrangements, choosing when and how much they work and often logged in as available to work for multiple platforms at the same time (multi-apping).
At least there is a little more clarity on the direction of travel, as the current uncertainty is already delaying changes to operating models. However, primary legislation will be needed to implement these changes and there is no indication of when that might be drafted. It seems most likely that reform is still years away.
The consultation closes on 8 January 2027. We will be responding to the consultation so please get in touch with your usual Lewis Silkin adviser if you have views you would like to share.
