Labour's plans for employment status

 

Employment status is not a label you attach depending on which rights you want to provide. It is inherent in the job role. Several factors affect an individual’s status, including bargaining power and how much freedom or control the individual has. 

 

In their plan to Make Work Pay, Labour committed to combine ‘employee’ and ‘worker’ into one category, creating a two-status system. (The wording of the plan suggests these categories will be defined as ‘self-employed’ and ‘worker’. However, we will refer to ‘self-employed’ and ‘employed’ throughout this article for clarity, because the rights of the newly defined ‘workers’ will be in-line with current ‘employees’.) 

 

More people will gain full employment rights, which is likely to increase costs for employers, and could lead to an increase in tribunal claims. But a simpler, two-tier system will offer more certainty than the current complex system, reducing the risk of mistakes that lead to tribunals. 

 

 

It is not yet clear whether workers will automatically become employees or whether parties will be able to adjust roles to become self-employed. 

 

Currently, employers have less control over workers than employees. Will workers keep the same arrangements, but with greater rights? Or will the parties have a chance to discuss additional obligations? If so, employers and employees may need to agree details of the new arrangements. If they can’t agree, the dispute may be difficult to solve, as the contract will not cover these circumstances. 

 

Once the two categories are combined, workers will gain the right to redundancy pay and the right to collective consultation in some circumstances. If you plan to restructure and outsource roles, it would be sensible to do it before the change. 

 

 

One issue with the current system is that some employers try to avoid offering rights by mis-labelling employment status. We have already seen businesses try to get around new tipping laws by suggesting the use of ‘freelancers.’ Some may try to pass off employees as ‘self-employed’ to avoid the cost of giving them full rights. But if workers don't genuinely fit the definition of self-employment, employers could face costly tribunal claims and be ordered to pay backpay. With a simpler system, it will be harder for bad employers to hide behind the confusing system. 

 

Other employers may try to move towards a genuinely self-employed workforce, but this isn’t feasible for all businesses. For example, it is unlikely a hospitality business could allow staff to choose when they work, whether to send a substitute, or impose their own ways of working. 

 

Even businesses that can run with a genuinely self-employed workforce may not find it any cheaper. It’s likely the employer would have to sacrifice some control over the role, yet contractors’ fees may be higher than an equivalent employee’s wages because of the costs they take on and the rights they give up. On top of this, contractors are entitled to certain rights, including freedom from discrimination. Under the proposed reforms, self-employed people will also benefit from the right to a written contract, and greater protections against blacklisting and late payment. Outsourced workers will also be included in pay-gap reporting. 

 

It will be up to each employer to decide whether genuinely outsourcing all work is possible, and whether they will be any better off. 

 

 

The Government intends to consult on creating a single status of worker, and how it will be implemented. Keep up to date on the latest consultations here. 

 

When recruiting, it may be simpler to hire employees or self-employed staff where possible. If you must hire workers, remember that the arrangements may change in the future and consider how you will go about this when the time comes. Bear in mind that, once workers gain redundancy rights, a restructure will be more costly.