With a consultation expected on introducing single worker status, Rebecca Seeley Harris looks at the implications for employment rights and tax.
Key issues for consultation
The anticipated consultation will seek clarity on several crucial aspects.
Boundary between workers and the genuinely self-employed
A primary issue is defining who qualifies as genuinely self-employed. The consultation must consider clear statutory criteria, such as control over work, economic risk, client diversity and the right to substitute. Previous case law, including Uber, indicates the courts prioritise actual working arrangements over contractual language. A clear statutory definition would reduce litigation and employer uncertainty.
One of the key concerns is the inclusion of the phrase “dependent contractor” in the Employment Rights Bill. The previous Labour manifesto questioned whether personal service companies (PSCs), which were dependent contractors, would be included in the worker status.
Scope of employment rights
A unified worker status means extending employment protections currently reserved for employees to all workers. This raises practical questions about immediate rights such as unfair dismissal, redundancy payments and family leave benefits. Employers will need clarity on whether all rights apply from day one or if some may be phased in.
Tax status alignment
One significant area of uncertainty is how the new employment status would align with tax status. Currently, employment and tax status tests differ, leading to inconsistencies. For instance, someone can be taxed as self-employed yet receive worker protections. Conversely, IR35 off-payroll rules treat certain contractors as employees for tax but not for employment law purposes.
A single worker status could simplify this by aligning employment rights and tax obligations, but unless explicitly confirmed by HMRC, tax alignment is not part of the consultation.
Implications for businesses and accountants
A single worker status carries major implications for businesses.
Increased employer costs and responsibilities
Employers may face significant new costs from expanded rights, including holiday pay and pensions for those previously classified as contractors. Companies heavily reliant on contractors or gig workers could face substantial restructuring or increased administrative burdens. Payroll and accounting professionals must anticipate changes and advise businesses accordingly.
Contract and payroll adjustments
Businesses will need to review and potentially amend contracts, ensuring compliance with new statutory requirements. Payroll systems might require updates to manage additional workers under PAYE arrangements. Accountants should help clients budget and plan for these increased costs and administrative changes.
Flexibility vs protection
While the reform seeks to eliminate exploitative practices, it risks reducing desirable flexibility for genuine freelancers. Consultation feedback will be crucial to ensure freelance professionals retain autonomy and flexibility without falling inadvertently under restrictive employment rules.
Key lessons from recent case law
Recent landmark cases highlight the necessity and complexity of employment status clarification.
- Uber vs Aslam: The Supreme Court decision in 2021 classified Uber drivers as workers entitled to minimum wage and holiday pay. It demonstrated that actual working conditions trump contractual designations, signalling clear judicial willingness to protect workers despite carefully worded contracts.
- Addison Lee: Drivers were similarly found to be workers, reinforcing judicial consistency in interpreting gig economy arrangements.
- Pimlico Plumbers: The Supreme Court’s decision affirmed worker status for a nominally self-employed plumber due to restrictive working conditions and limited subcontracting rights, emphasising practical working realities over labels.
Deliveroo and substitution
Interestingly, the case of IWUGB vs (1) Central Arbitration Committee (CAC) (2) Roofoods Ltd, trading as Deliveroo [2023] UKSC 43 focused on substitution and won on that basis. So, the Deliveroo riders were denied employment rights because there was an absolute right to substitute.
As a result of that, a proposal was made in the Employment Rights Bill 2025 to ban substitution clauses. The reasoning is that they restrict employment rights and can be exploitative. The proposal has, however, since been withdrawn.
Practical considerations for accountants
Accountants and payroll professionals should carefully consider the following.
- Employment status reviews: Proactively reviewing clients’ workforce classifications will be essential. Identifying roles likely to be reclassified under single worker status and advising businesses to adapt early will mitigate potential legal and financial risks.
- Tax and IR35 compliance: Until HMRC explicitly aligns tax and employment definitions, businesses will likely still need to conduct separate IR35 assessments. Accountants should advise continued vigilance in compliance to avoid unexpected tax liabilities.
- Engagement in consultation: Accountants have an opportunity to influence outcomes through consultation responses. Highlighting practical compliance issues, recommending clear statutory definitions, and advocating for the alignment of employment and tax status definitions could significantly ease transitional burdens.
Questions remain
The single worker status reform aims to bring clarity and fairness to UK employment law. While promising greater protection for workers and simplified compliance for employers, significant questions remain. This is particularly around defining genuine self-employment and aligning tax treatment. Accountants and payroll professionals must stay informed, proactively advise clients and engage constructively in upcoming consultations. This will help ensure the new framework provides both equitable worker protections and viable business solutions in an evolving employment landscape.
