Single Worker Status: Consultation is coming, but what can we expect?

Single Worker Status: Consultation is coming, but what can we expect?

Championed as bringing in “protections they have been denied” for all workers, Labour’s Single Worker Status pledge was a key part of their pre-election plans to transform the world of work.

The policy centres around moving from the current three types of employment status – employee, self-employed and ‘worker’ – to one, new status. The government said the aim was to address issues around the growth of the gig economy and workers’ rights, particularly given large court cases involving the likes of Uber.

But since Labour came to power, the idea had gone quiet. Notably, it did not feature in the Employment Rights Bill, prompting speculation it could be brushed under the carpet or, at most, not be introduced until the end of the current Parliament in 2029.

Indeed, in January, Business Minister Justin Madders said the move towards Single Worker Status “will take longer to undertake and implement” and that consultation is “a longer-term goal”.

All of that changed in July though. Hidden away in a transcript from a House of Lords debate was an update. As part of a discussion on the Report Stage of the Employment Rights Bill, Baroness Maggie Jones said the government is committed to consult on the pressing issues with the existing framework for employment status.

More importantly, she went on to announce that this consultation would be published by the end of 2025.

While Single Worker Status was not specifically mentioned, it seems natural that it will be wrapped up in what appears to be a broader consultation on status.

Employer, worker and self-employed – the current worker statuses and their rights:

Currently, there are three main worker statuses: employee, worker and self-employed. Each comes with different rights and responsibilities within the workplace.

• Employee: A person who works under an employment contract and has all the employment rights in place, including protection against unfair dismissal, redundancy and holiday pay, and time off for emergencies.
  
  
• Worker: Someone who has a contract or an alternative arrangement to do work or provide services for money or a benefit in kind such as the promise of future work. They only have some employment rights, with those they are not entitled to including statutory sick pay and protection against unfair dismissal.
  
  
• Self-employed: A person who runs their own business and are not paid via PAYE. They don’t have the rights and responsibilities of an employee.
  
  

However, the world of work has changed in recent years. Zero-hour contracts, the rise of the gig economy and increasing numbers of self-employed workers mean the UK’s labour market is far more fragmented than in previous years.

While these changes have resulted in increased flexibility for many workers, they have also led to challenges such as a lack of job security and limited access to benefits.
Having three categories naturally creates a lot of confusion.

Labour’s answer came in its ‘Make Work Pay’ manifesto, in which it has pledged to combat what it calls an uneven playing field caused by existing employment laws which have led to the creation of unsecure jobs and inequality in the working world.

Central to this plan is Single Worker Status.

What will Single Worker Status mean for workers’ individual rights:

The new plans will align the three worker statuses under a single status, providing them all with the same rights.

It will mean that casual workers and those who are self-employed will be entitled to basic rights including:
 

• The minimum wage
  
  
• Holiday pay
  
  
• Statutory sick pay
  
  
• Redundancy rights
  
  
• Protection from unfair dismissal
  
  
• The right to unionise
  
  

Single Worker Status will therefore create a single legal definition of a worker, meaning workers and employers alike will be able to more easily understand their rights and obligations.

The changes are likely to come with increased enforcement measures to allow workers to claim what they are entitled to and to ensure compliance by employers.

The government says Single Worker Status will create a clear legal definition for all workers, leading to a more productive, secure workforce. The hope is that this will lead to higher employee satisfaction, reduced turnover of currently insecure roles, and more job security for workers and the self-employed.

Those who are self-employed or on zero-hour contracts will gain access to rights they don’t currently have, such as sick pay and protection against unfair dismissal. The government hopes access to a national minimum wage and holiday pay will provide the security and income to lift many casual workers out of poverty.

However, self-employed contractors, who may currently enjoy the freedom to work within the ‘gig’ economy, are likely to feel the impact of the changes. They may no longer be able to work for more than one employer and could have higher tax liabilities.

While the new status will provide new protections and rights, there is concern it may not maintain the current flexibility.

Employers, meanwhile, will benefit from a more transparent system. However, there are also implications around compliance costs, administrative changes, and increased accountability.

Businesses will need to make sure their HR and payroll systems are compliant with the new rules, and some may see their costs increase due to the requirement to provide all workers with sick and holiday pay.

There is some concern that any extra costs incurred by employers will be passed on to consumers in the form of higher prices or even job losses if businesses are unable to take on additional costs.

Fresh consultation: Good news or another false start?

The announcement that consultation is coming is positive on the face of it. This is a move which should be supported, but it doesn’t come without some serious questions.

Firstly, we’ve been here before and not that long ago. There was a comprehensive government consultation on employment status back in 2018 which involved the Department for Business and Trade (DBT), the Treasury and HMRC.

While this covered a huge amount of ground across tax and employment law, absolutely nothing happened as a result.

Before that we had the Matthew Taylor review of modern working practices in 2017, which was similarly comprehensive and contained various recommendations and plans – none of which happened.

It is vital this time around that the government has the teeth to carry through any sensible recommendations that are made.

Secondly, we have scant detail about what this consultation will cover. 

One of the fundamental issues with employment status is that we have two distinct arms – employment status for rights and employment status for tax. 

The former goes through the employment tribunal system and the latter through tax tribunals. While they occasionally use mutual case law, the two jurisdictions are otherwise separate.

The current ‘worker’ status does not exist in tax law meaning those who hold that status are in a real no man’s land from a tax perspective.

The suggestion is that this consultation may be driven by the DBT rather than HMRC, but it is imperative both tax and employment rights are considered together and that any solution results in the alignment of the two.

If this doesn’t happen, the intended simplification which the government says it craves could not only be lost, but the changes could have the opposite effect.

There are also two potentially conflicting problems which need to be addressed in employment status, both of which were referenced in the Lords debate. 

At one end of the scale you have workers, perhaps in lower paid roles who are pushed into self-employment, but in reality should have and deserve the protections that employment affords.

Conversely, there are those who want to be self-employed and are completely cognisant of the risks involved. Many of this cohort have been forced into being employed for tax purposes because of things like the reformed IR35 legislation or off-payroll rules.

The consultation will need to address both issues and create a system which protects both groups without unfair disadvantage.

As further details are revealed, we will keep our clients, partners and contractors informed of what any outcomes will mean and help you navigate the upcoming changes.