Overnight, government revealed the first details of its highly anticipated Employment Rights Bill, containing a batch of 28 reforms that were a keystone of the Labour Party’s election manifesto.
The focus of the announcement is on strengthening protections for employees, but it raises some important questions for the self-employed too – and potentially blurs the boundaries between working for someone else and working for yourself.
The new measures at a glance
With the new Bill, government is pledging to end “one-sided flexibility”, particularly by ending “exploitative” zero-hours contracts. Whilst this wouldn’t see these contracts banned altogether, workers will get the right to a guaranteed hours contract – presumably one that reflects the hours they’ve worked up until that point. Government will also look to put a stop to “fire and rehire” practices and give workers protection against unfair dismissal from day one on the job.
Other rights and entitlements set to be beefed up include bereavement leave, dismissal during pregnancy or maternity leave, and a default assumption of flexible working. The minimum wage’s age bandings will also be removed and a new ‘Fair Work Agency’ will be established to enforce it all, including – most notably for umbrella company contractors – holiday pay.
The announcement was roundly welcomed by unions, as well as the bosses of major businesses and representative groups. But it’s also drawn fierce criticism from the Federation of Small Businesses who described it as a “rushed job, clumsy, chaotic and poorly planned.”
Importantly for the self-employed, there are pledges to give the self-employed a right to a written contract for their engagements, as well as stronger provisions on health and safety and blacklisting. Finally, government reiterated plans to consult on a “single status of worker” for all but the genuinely self-employed – an idea that IPSE has expressed mixed feelings about.
From IR35 to the gig economy – the work to fix status rules needs to start now
Beyond the main bill, government’s promise to consult on moving towards a “simpler two-part framework for employment status” raises the question of whether the cart is being put before the horse.
When it comes to employment rights, there are three forms of employment in the UK – ‘employee’, ‘limb (b) worker’, and ‘self-employed’. But for tax purposes, there are only two – ‘employee’ and ‘self-employed’.
If government does go ahead with its plans, it would be bringing employment and tax status into closer alignment. But this alone won’t reduce the confusion and dispute over employment status that we see across the economy. To do that, we also need to update the tests we use to decide who is an employee – and who isn’t.
It was only recently that we saw how a Supreme Court ruling on the tax status of a handful of self-employed referees will make it even harder for freelancers and contractors to prove they’re genuinely self-employed in future. Meanwhile, unions are routinely taking gig economy platforms to court to achieve the exact opposite for their members – with mixed success. These disputes take years to resolve – a decade and counting in the referees’ case – in part because even judges are struggling to clarify the meaning of criteria such as ‘mutuality of obligation’.
The confusion over status also amplifies the damage caused by the IR35 or off-payroll working rules. Across the private sector, contractors and clients are desperate for a better way of proving that a freelance engagement is legitimate. We even saw the UK’s premier business lobby group, the CBI, call for an IR35 ‘green card’ system in a letter to the Chancellor ahead of her maiden Budget this month.
Ultimately, before government directly intervenes in employment status for the first time in decades, they ought to make sure that the self-employed have a simpler and fairer means of proving they are legitimately in business on their own account.
New legal protections for the self-employed
As part of the move to having two employment statuses of ‘worker’ and ‘self-employed’, Labour also want to bring forward other specific manifesto pledges for the self-employed.
- Blacklisting protections. The threat of being blacklisted by a client can hang over freelancers’ heads when they have concerns or grievances to raise – whether it relates to disputes over work and pay, or bullying and abuse
- Health and safety. Ensuring that the self-employed are better protected by health and safety rules in workplaces, regardless of their employment status
- Right to a written contract. Whilst having a written contract in place is always good advice for freelancers, there’s no obligation for them or their clients to write one up. As such, some engagements do go ahead without a clearly defined schedule of work and payments, which can then make it hard for freelancers to enforce terms that may have only been discussed verbally. However, it’s not yet clear how government intends for right to a written contract to come into play
Has government quietly dropped umbrella companies from its agenda?
Today’s announcement also raises questions about the as-yet unregulated umbrella company sector – a subject which Labour have so far said surprisingly little about.
The proposed ‘Fair Work Agency’ – which would bring together three existing labour rights enforcement agencies into one body – marks the revival of the previous Conservative government’s plans for a ‘Single Enforcement Body’. Contractors – many of whom now find themselves working through an umbrella company as a result of the IR35 reforms – had hoped this new body would also take on the task of regulating the umbrella company market.
Despite government running a series of consultations on umbrella companies in the run up to the election, we are yet to see the new Labour government share much detail about how – or if – it plans to continue this work. However, we do know that the new Fair Work Agency will enforce rules around holiday pay, an area that IPSE has previously highlighted as being one of the priorities for regulation.
The takeaway for the self-employed
Overall, whilst the Employment Rights Bill is geared to the needs of employees – particularly those in occupations with low pay and uncertain hours – we are seeing the first signs of employment policymaking tailored specifically to the self-employed.
However, of the proposals contained in the Bill, those relevant to the self-employed are among the least detailed – and will therefore require the most time to clarify and get right.
As ever, IPSE will be making sure that the voice of the self-employed is listened to as the Bill makes its way through Parliament. One of the most effective tools in our arsenal is telling policymakers exactly how confident you feel in the government, the economy and their own businesses. To do this, we need your help with our latest survey.
Please take part in the Freelancer Confidence survey and help us to make headlines and shape policy on your behalf.
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