The government has ruled out making any changes to the definitions of employment status for tax purposes, as there are fears costs for businesses could be increased.

The 2018 consultation on worker status sought views on the employment status framework, focusing on its complexity, the fact that it was open to interpretation, and the difficulty to resolve disputes and alignment between the frameworks for tax and employment rights.

Results of consultation

Ultimately, it has taken four years for the government to address the results of the initial consultation and, following a further consultation on potential reforms, it has been decided that there will be no change to the current position. The government has commented:

‘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.’

Proposed changes to current rules

After the consultation, there was criticism levied at the current employment status tests as they have been described as outdated and no longer relevant to modern working practices.

Furthermore, some respondents believed that current employment status tests do not encompass enough factors to bring about changes to working practices.

Where respondents were in favour of legislating the current employment status tests, the vast majority said that mutuality of obligation should be a relevant factor for employee status. However, the majority of respondents were not in favour of codifying the current status test.

Some said that an alternative legislated test would be preferable, however, the majority of these confirmed that mutuality of obligation is not relevant. Despite these recommendations, there was no clear consensus on what an alternative legislative test should look like.

New government guidance

In order to provide greater clarity for businesses and individuals regarding the correct legal interpretation of working time for National Minimum Wage purposes for platform workers, the government have confirmed that they will be updating the ‘Calculating the Minimum Wage’ guidance.

Moreover, individuals who work in the gig or platform-based economy will be entitled to the minimum wage if they are considered a worker for minimum wage purposes.

Once an individual is deemed to be a worker, their working time needs to be calculated. The guidance describes times that are likely to count as ‘working time’ for gig economy workers, such as waiting for a customer after accepting a job.

Dave Chaplin, CEO of IR35 Shield commented:

‘The report makes for very disappointing reading. After spending over four years since the consultation closed on 1 June 2018, the government has carefully considered all 162 responses and published a 32-page document which effectively says, “We have decided to do nothing”.

‘Employment status is complex, and as previous governments have done, this topic is being filed into the “too difficult to deal with” drawer.’

To conclude, nothing in terms of employment status will be changing. There are updates to the guidance as discussed, but the rules will remain the same.

Full details of the guidance can be found here.

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