Employment Status Consultation: we want to hear from you

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In February the Government responded to Matthew Taylor’s review into Modern Working Practices. One of the key areas it will consult on relates to proposals to create greater clarity around employment status.

Specifically it wants to do the following:

  • To legislate on the existing employment status tests around ‘employee’ and ‘worker’.
  • While not keen to define self-employment in law, it does propose legislating to define whether an individual is ‘in business on their own account’ as part of the test for ‘worker’ status.
  • Downplay two of the traditional markers of self-employment in any statutory test - mutuality of obligation and substitution. 
  • Align tax and employment rights more closely.

IPSE’s view

We are pleased that government is taking such a serious look at resolving some of the thorny issues around employment status.

Disappointingly though, the government has decided that defining self-employment in law would be too radical. However, it does propose legislating to define whether an individual is ‘in business on their own account’, as part of the test for ‘worker’ status. This could be a positive development, with the caveat that the criteria properly reflect the nature of running your own business.

From speaking with civil servants, it seems the key crux of this consultation is around where the boundary between ‘worker’ and ‘self-employed’ lies. We have concerns that policy may be designed with the intention of shepherding people away from self-employment and into the ‘worker’ category.

They seem keen to do this by downplaying two of the traditional markers of self-employment – being able to reject work (we believe this is at the heart of ‘mutuality of obligation’) and having the ability to send a substitute.

Instead they believe the vague concept of ‘control’ should be the only real factor considered. IPSE believes the unintended consequences of this approach could be dire and the government should be extremely careful about pushing people away from self-employment against their will.

IPSE is also very interested in the government’s proposal to align tax and employment rights. This part of the consultation, alluding to IR35, asks if those deemed employed for tax should automatically get employment rights.

There is certainly merit in simplifying matters by aligning tax and employment rights and statuses. However, with government seemingly keen to consult on rolling out disastrous IR35 changes into the private sector, it must consider what the interaction between these two pieces of work is.

It would be prudent for government to avoid confusion by not consulting on both pieces of work simultaneously. There should be no further changes to IR35 until government has decided how it plans to amend the employment status framework.

As we develop our response to this consultation, IPSE wants to hear the views of members. Please reply to [email protected] if you have any views on this consultation, particularly around the key questions below.

  1. To what extent do you agree with government’s proposal to incorporate employment status tests into legislation?
  2. Do you think self-employment should be defined in law, as the ‘worker’ and ‘employee’ statuses are?
  3. What do you think of government’s intention to downplay in legislation two of the traditional markers of self-employment - mutuality of obligation and substitution?
  4. Do you think there are other factors that could be used as an indicator of self-employment status e.g. the length of time for an engagement or the ability to negotiate your rate of pay?
  5. What are your views on government’s proposal to more closely align tax and employment status?

Meet the author

Jordan Marshall

Policy Development Manager