The Government has launched a consultation until 8 January 2027 on employment status reform and new protections for self-employed people. The proposals will be of particular interest to employers that rely heavily on individuals treated as self-employed, such as in the gig economy, construction and care sectors, as well as professional services and businesses using consultants and project-based freelancers. The changes suggested would make it easier for some of these individuals to qualify for worker status and rights and, even for those truly self-employed, an obligation to provide a written statement of key terms would add a significant administrative burden. Employers with a predominantly conventional employee workforce will be less affected. However, it should be noted that the Government's previously expressed desire to create a single status of worker (removing the distinction between employee and worker) has not been abandoned and remains a 'long-term goal'; this would have much more widespread implications.
The aim of the proposals on employment status is to clamp down on 'bogus self-employment' to prevent substitution clauses being used inappropriately to defeat worker status. Options include:
- modifying the current ‘limb (b) worker’ test to place less emphasis on personal service and elevate the importance of control. The absence of a requirement for personal service would no longer by itself prevent a tribunal from considering whether the individual is a worker on all the facts, provided there is a significant level of direction or control (in particular over the rate of pay) from the employer. Alternatives mooted include making clear that only a completely unfettered right of substitution could prevent worker status, or to legislate so that the existence of a right of substitution does not outweigh all other factors that point to worker status;
- introducing a presumption of worker status so that the burden of proof for employment tribunal claims to worker rights is moved to the employer to demonstrate that the person they engage is not a worker and is therefore genuinely self-employed;
- introducing increased penalties for employers who repeatedly misclassify their workforce, so that where employers unsuccessfully argue that someone does not have limb (b) worker or employee status, despite a tribunal having previously ruled that their colleagues do have that status (where the facts of their colleagues’ employment are broadly similar to those of the claimant’s employment) the tribunal can order the payment of an additional penalty, currently of between £100 and £20,000 per claim;
- using the Fair Work Agency’s enforcement powers, including to bring tribunal claims to clarify status for groups of individuals; and
- a (non-binding) online assessment tool for indicating likely status.
The consultation notes that wider risks of illegal working arise from substitution, which it has tackled in part by extending the Right to Work check regime from 1 October 2026 to cover those who engage limb (b) workers or individual sub-contractors (including substitutes). It hopes that removing the incentive for businesses to include substitution clauses will also reduce the prevalence of widespread substitution and make it harder to work illegally.
The Government also seeks views on strengthening protections for the genuinely self-employed (as promised in the Government's Plan to Make Work Pay), including:
- a new right to a written statement of key contract terms (the parties, scope and duration of work, payment and termination terms) when the individual is providing services to a business, potentially only for engagements over a certain duration or over a nominal value; and
- extending health and safety protections (such as protection from detriment for taking appropriate steps when faced with serious and imminent danger in the workplace and allowing self-employed union members to be health and safety representatives) and blacklisting protections.
The consultation notes that the Government is separately considering extending other rights to self-employed workers, in its review of parental leave and pay (due to report in 'early 2027') and restrictions on harassment and discrimination NDAs (where the response 'will be published in due course').
Affected employers may wish to respond to the consultation here.
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