The Government has responded to its 2018 consultation on employment status… but has decided against law reform. Instead, it has published new guidance to help 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 – something almost every employment law practitioner had been saying for years.

The Government issued a consultation for people’s views and to achieve greater clarity and certainty. It also asked whether there should be an alignment of the tests for tax and employment status. 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 framework (worker, employee and self-employed) for employment rights provides the right balance. They say it allows for flexibility but also ensures that workers who are engaged in a casual employment relationship have core protections, such as the right to the National Minimum wage and to holiday pay.
  • There will be no legislative reform of the employment tests. Whilst there are problems with the current system, including the boundaries between the three statuses being unclear, it considers that the benefits of creating a new framework on whether someone is an employee, worker, or self-employed  are outweighed by the risks associated with a change in the law – clarity in the long term but cost and uncertainty for businesses in the short term.
  • 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.
  • As for aligning the tax and employment tests, the Government recognises that there could be benefits… but now is not the right time. It has said they 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.
  • There are no plans to introduce an online tool, similar to the Check Employment Status for Tax (CEST) tool, to help determine eligibility for employment rights.

4th August 2022

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