Government responds to consultation and publishes employment status guidance

Government responds to consultation and publishes employment status guidance

Furlough Leave: HMRC and ACAS guidance updated as at 30 April 2020

This summer, the government published the outcome of its employment status consultation which ran from February to June 2018. The consultation had sought views on the current employment status framework, focusing on feedback about its complexity, its openness to interpretation and the difficulty in resolving disputes about the alignment between it and the tax framework.

The consultation results

The results of the consultation had revealed that:

  • a large number of participants were supportive of employment status reform but there was no overall consensus on what action the government should take as most agree it would be complex to implement any kind of reform around employment status
  • the worker category is helpful due to the flexibility it allows individuals and businesses in an evolving labour market and
  • many of the participants were in favour of improved guidance on the employment status boundaries and examples on how to apply the rules in different scenarios

The consultation concluded that:

“The government recognises that the employment status framework for rights works for the majority, but that boundaries between the different statuses can be unclear for some individuals and employers. However, the benefits of creating a new framework for employment status are currently outweighed by the potential disruption associated with legislative reform. Although such reform could help bring clarity in the long term, it might create cost and uncertainty for businesses in the short term, at a time where they are focusing on recovering from the pandemic.”

Unsurprisingly, the consultation outcome has been criticised for failing to align the employment status and tax frameworks. Many were expecting more clarification around employment status tax assessments, particularly because "worker" status still exists in the employment law context but doesn’t exist for tax purposes.

New guidance

However, the consultation has resulted in new guidance being published here which aims to make it easier for individuals to work out their own status.

The guidance sets out the differences between employee status, limb (b) worker status and self-employment by explaining the relevance of "personal service", "control" and "mutuality of obligation". It also goes into which other factors might potentially be relevant to employment status with examples – such as the terms and conditions of the contract of engagement, financial risk, integration within the organisation, provision of equipment, how payments are made and exclusivity.

Finally, the guidance also gives further background about various other types of employment with definitions and examples – including discussing the gig economy, zero-hour workers, freelancers, contractors, consultants and interims, agency workers, employee shareholder status, volunteers, interns and apprenticeships.

To read the full consultation and the employment status guidance, see the government website here.

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