The government has finally published its response in relation to the employment status consultation. It has also released new guidance on determining employment status, and the rights and protections that come with it. The objective behind this new guide is to consolidate relevant case law, such as the Uber Supreme Court judgment, into one place to make it easier for businesses and workers to determine employment status.
Employment Status
The new guide aims to bring together all of the recent case law under one roof to make it easier for business and their workers to identify an individuals correct employment status, and the rights they will therefore have, given that status.
Employment status is a key factor in both employment law and tax law, as it determines the extent of an individuals rights in the labour market, as well as the taxes both they and who they work for have to pay. What also complicates matters is that whilst there are two tax statuses - self-employed and employed, there are three labour market statuses, each of which come with different rights: self-employed, worker, and employee. This lack of alignment has been the subject of considerable criticism. The differences between the various statuses are set out here.
The new guide provides some clarity on the rights that gig economy workers have in light of the Uber Supreme Court case, in which it was held that those who work in the gig economy can potentially meet the criteria to be classified as workers, which then entitles them to key rights such as the national minimum wage and holiday pay. The guide also provides case studies and examples in order to illustrate how to apply the rules in various different situations
The guide has been published by way of follow up to the Government response to the employment status consultation. The Parliamentary Under-Secretary of State for Small Business, Consumers and Labour Markets, Jane Hunt, stated: "Today we are tidying up the rules, helping workers understand their employment rights and find out if they are being treated fairly by their workplace. Importantly, this one-stop shop guidance is not just for workers – it will also give businesses the confidence and the tools to better support their staff, helping to increase productivity and drive growth."
Government Response To Consultation
Nevertheless, in its long awaited response to the employment status consultation (which began way back in 2018 as a result of the Taylor Review, and which received 162 responses), the Government stated: "Now is not the right time to overhaul the employment status frameworks for rights and for tax but we are delivering greater clarity around the frameworks for individuals and employers by publishing guidance for status and working time for minimum wage purposes."
The Need To Align Employment Status With Tax Status
The Government's do nothing response to retain the status quo comes despite the fact that the Taylor Review which prompted the consultation on employment status in the first place, recommended an overhaul of the system. In failing to legislate, the Government has not only failed to remove the potential for confusion, but they have also failed to align employment status with tax status.
One of the huge injustices this lack of alignment creates is that those who now have to work within IR35 have to pay the same rates of Income Tax and National Insurance as employees, but at the same time do not benefit from having any actual employment rights. That is, they are treated as employees only for tax purposes, without have the same status within the labour market.
Reform Required
The senior policy advisor for employment relations at the Chartered Institute of Personnel and Development (CIPD), Rachel Suff, argues that: "The guidance is a positive step but we need more deep-seated reform, including the abolition of worker status, and switching the legal presumption to being an employee, unless proved otherwise by the employer."
IR35
The Government's response even goes as far as to assert that in relation to the highly flawed Check Employment Status for Tax (CEST) tool, "for tax, the majority of status cases are simple and clear." Yet, as we have highlighted in previous articles, not even the Government's very own departments have been able to make the tool work reliably.
In relation to the failure to align employment status with tax status, the CEO of Qdos, Seb Maley, points out that: "This response is astonishing, even for this government. IR35 reform has seen tens of thousands of genuinely self-employed contractors left with no choice but to work inside IR35, where they are taxed as employees and can pay anything up to 30% more in tax. Yet still, these workers will not be granted employment rights in exchange. If now isn’t the right time to align tax and employment status, when is? Refusing to abolish what’s known as ‘zero rights employment’ is unjust, illogical and a huge oversight."
The CEO of IR35 Shield, Dave Chaplin, adds: "Today’s report makes for very disappointing reading. After spending over four years since the consultation closed on 1st June 2018, the Government has carefully considered all 162 responses and published a 32-page document which effectively says, ‘We have decided to do nothing’....Employment status is complex, and as previous governments have done, this topic is being filed into the ‘too difficult to deal with’ drawer."
