Employment status: new guidance but no legislative reform

New employment status guidance published

The Government has responded to its 2018 consultation on employment status and has decided against legislative reform of the employment status tests. Instead it has published new guidance designed to improve clarity around employment status.

Taylor review and employment status consultation

In 2018, the Government accepted the Taylor Review’s conclusion that the tests for employment status are unclear and uncertain. It issued a consultation seeking views on whether there was a consensus on this and, if so, how to achieve greater clarity and certainty. It also asked whether the tests for tax and employment status should be aligned. There are three different types of employment status for employment rights (employee, worker and self-employed) but only two for tax purposes (employed and self-employed).

Consultation response

The Government has now issued its long-awaited response to the consultation:

• It believes that the three-tiered employment status framework for employment rights provides the right balance for the UK Labour Market. It allows flexibility but also ensures that workers in more casual employment relationships have core protections, such as the right to the National Minimum wage and to holiday pay.
• It has decided against legislative reform of the employment status tests. It acknowledges the problems with the current system, including the fact that boundaries between the different statuses can be unclear. However, it considers that the benefits of creating a new framework for employment status are currently outweighed by the risk associated with legislative reform. Reform could help bring clarity in the long term but might create cost and uncertainty for businesses in the short term, at a time where they are focusing on recovering from the pandemic.
• It has published three separate pieces of guidance designed to bring additional clarity to employment status, one aimed at individuals, one aimed at employers and more detailed guidance aimed at HR and legal professionals.
• While the Government recognises that there could be benefits from aligning the tax and employment status tests, it considers that now is not the right time do this. However, it will work closely with stakeholders to explore longer term options to improve the employment status system for tax to ensure it is as clear as possible.
• It does not plan to introduce an online tool, similar to the Check Employment Status for Tax (CEST) tool, to help determine employment status for employment rights.

National Minimum Wage guidance

The Government has also updated its guidance on Calculating the National Minimum Wage to add a new section on gig economy and platform-based workers. This explains how to assess what counts as "working time" for National Minimum Wage purposes for individuals working in this way.