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Publication of the Employment Status and Rights Guide

20/09/2022

The Government has this week published a response to the Employment Status Consultation, which sought to explore employment status reform and alternative approaches that might better provide individuals and businesses with greater certainty and clarity in this regard.

The uncertainty around employment status has long caused confusion for businesses and individuals alike. With the growth of the gig economy and more flexible ways of working, the lines have become increasingly blurred.

Why does this matter? Employment status is core to both employment law and the tax system. It  determines an individual’s rights, as well as the taxes that they and the business they work for, or with, must pay. For tax purposes, there are two statuses – self-employed and employed. For rights purposes, there are three statuses – self-employed, limb (b) worker, and employee.

In practical terms, workers enjoy rights which the self-employed do not, such as the right to receive the minimum period of annual leave under the Working Time Regulations, and the right to be paid National Minimum Wage. Employees, in turn, enjoy protections which workers do not, such as the right of qualifying employees not to be unfairly dismissed and the right to receive statutory redundancy payments.

The complexities around employment can often result in difficulties for employers and unfair treatment of employees, and it unsurprising that there has been significant support for reform. It would appear, however, that the Government disagrees. Despite recognising that the boundaries between the different statuses (employee/worker/self-employed) can be unclear, and that there is much support for reform, the Government has decided not to do so. The reasons for not reforming include:

  • No overall consensus on what action the Government should take;
  • Benefits of reform outweighed by risk associated with reform;
  • Might bring clarity in the long-term but cost in the short-term;
  • Need to focus on recovering from the pandemic;
  • Uber Supreme Court judgment has provided more clarity about the approach.

Instead, the Government has issued 3 Guides which it states, ‘will act as a one-stop-shop for individuals and businesses to understand which employment rights apply to them.’ The Employment Status and Rights Guides include:

It is somewhat disappointing that the Government has failed to grasp this opportunity to simplify employment status, and the reasons provided by the Government for doing so are not particularly compelling. However, with reform unlikely in the immediate future unless a different government comes in and takes a new approach, businesses will have to rely on the three accompanying Guides in the interim.

Whilst employment law is devolved in Northern Ireland and the Guides only apply to England, Scotland, and Wales, they will undoubtedly be useful in Northern Ireland in seeking to understand and define the working relationship. In particular, the Checklist for Employers and Other Engagers will likely prove to be very helpful for Members.

The full Government Response can be accessed by clicking on this link: Employment Status Consultation Government Response