Employment status reform and protections for the self-employed

Why should I read this?

The government has launched a consultation on reforming employment status for employment rights purposes and introducing protections for the self-employed. The key proposals are: to place less emphasis on personal service when determining worker status; introduce a presumption of worker status in employment tribunal claims; strengthen enforcement; and extend certain protections to the self-employed.

The consultation does not cover employment status for tax purposes.

The proposals do not (contrary to earlier proposals), at this stage, seek to establish a single status of worker, although the government will consider this as a longer-term goal.

If the current proposals are taken forward, they are likely to bring more individuals within worker status. Consequently, employers should consider the potential implications for workforce models, contractual arrangements, compliance and employment costs.

What do I need to know?

The consultation closes on 8 January 2027 and applies to England, Wales and Scotland. It covers the following key areas:

Reforming the legal test on worker status to place less emphasis on personal service

UK employment law recognises three categories of employment status: employees, ‘limb (b) workers’ (workers) and the self-employed, with employment protection highest for employees and lowest for the self-employed.

The first stage for an individual to establish that they are a worker is that there is a contract between them and the employer/engager. Once that has been established, the second stage currently is whether the individual provides a ‘personal service’, meaning the work must be carried out personally by the individual. A genuine, unrestricted right to appoint a substitute will generally be inconsistent with an obligation of personal service, pointing against the individual being considered a worker, even if they are subject to significant control. However, the effect of a substitution clause will depend on its scope and how the arrangement operates in practice.

The government’s preferred approach is to elevate the importance of control in the test, so that a failure to meet the personal service test would not on its own prevent someone from being a worker. An individual could only fail the test at the second stage if there was neither personal service nor significant direction or control by the employer/engager. The tribunal would then go on to consider whether the individual is carrying on a business or profession on their own account, which would include looking again at personal service. The government is not proposing to remove the personal service requirement altogether, and its starting point is that anyone currently recognised as a worker would remain one. The government also intends that any change to the worker definition would be reflected in the equivalent definitions in other legislation, such as the Working Time Regulations 1998 and the National Minimum Wage Act 1998.

The government recognises that greater clarity would be needed on the weight given to different aspects of control in the relationship. In its view, the ability to set or negotiate pay is a key factor in differentiating between workers and the self-employed.

Alternative options are to: (i) lower the bar for personal service, so that a right of substitution limited only by the need for the substitute to be equally qualified would be consistent with personal service; or (ii) legislate expressly that a right of substitution is not the sole or overriding factor in preventing someone from being a worker.

Presumption of worker status

Currently, the burden is on the individual to establish worker status in the employment tribunal. The government proposes a presumption of worker status, so that the employer/engager would have to prove that the individual is not a worker. This mirrors the existing presumption for National Minimum Wage claims and would apply when determining worker status in claims relating to rights dependant on that status, such as holiday pay and access to a workplace pension.

The presumption would apply only to whether the individual has worker status (not employee status). The existing burden and standard of proof would continue to apply to whether the rights were, in fact, met. The consultation asks whether any conditions, such as facts indicating direction and control, should be satisfied before the presumption applies (notably, this is a feature of the EU Platform Workers Directive (for more detail, read our briefing)). Tribunals would retain their power to strike out claims with no reasonable prospect of success.

Enhanced enforcement powers

The government proposes to amend an existing rarely used power so that, where a tribunal has already found that individuals working on broadly similar facts have worker or employee status, an employer/engager’s continued failure to recognise that status could be treated as an aggravating factor. This could enable the tribunal to order an additional penalty, payable to the Secretary of State, currently of between £100 and £20,000 per claim.

The Fair Work Agency does not currently enforce employment status and has no direct mechanism for obtaining a judicial determination of status where evidence is inconclusive. The consultation asks how its new civil proceedings and legal assistance powers could be used to determine status, for example by bringing or supporting claims where bogus self-employment is suspected.

Renaming ‘limb (b) worker’ and an online status tool

To improve clarity, the government is also consulting on whether:

• to rename ‘limb (b) worker’, and
• to introduce an online assessment tool, similar to HMRC’s Check Employment Status for Tax (CEST) tool, which would give a non-binding indication of employment status

Strengthening protections for the self-employed

In the Plan to Make Work Pay, the government committed to strengthening certain rights and protections for the self-employed. The consultation considers:

• a right to a written statement of key terms (such as the parties’ names, scope of work, expected period of work, payment terms and termination terms) where services are provided to a business rather than a private individual, with a written contract containing the key terms satisfying the requirement. The consultation also asks whether qualifying criteria should apply, such as a minimum contract length (options of 1 week, 4 weeks or 3 months) or contract value
• extending blacklisting protections to the self-employed; and
• strengthening health and safety protections, by extending detriment protection and allowing non-employees who are members of any trade union to act as health and safety representatives

What should I do next?

If taken forward, the proposals are likely to bring more individuals within worker status and its associated rights, such as holiday pay, the National Minimum Wage and auto-enrolment (subject to eligibility criteria). Employers should consider:

• auditing substitution clauses and how they operate in practice
• reviewing the level of control exercised over individuals, including over pay, scheduling and branding; and
• assessing the potential cost of worker rights for at-risk groups, and the implications for workforce models and contractual arrangements

Potential wider implications

The proposals should be viewed alongside other changes affecting the wider workforce, such as the extension of right to work checks to those engaging workers, individual subcontractors and some gig economy arrangements which came into force on 1 October 2026 (for more detail, read our briefing), possible reform of the agency workers regime on which the response to the government’s recent consultation is awaited (for more detail, see the consultation) and the proposed introduction of guaranteed hours offers under the Employment Rights Act 2025 (for more detail, read our briefing).

Further reading and virtual roundtable

A copy of the consultation and associated documents can be found on the government website.

Join us for our virtual roundtable on 30 November 2026 to discuss this consultation and the practical implications of the proposals. Views from this discussion will be used to compile a collective response to the consultation. Register here.

Monitor the latest UK Employment Rights Act developments with our interactive tracker, covering the key employment topics, plus access to the latest events and expert briefings all in one place.

How we can help

Our employment team has extensive experience advising businesses on employment status and complex workforce models. We can help you prepare for these reforms by:

• auditing your wider workforce to identify groups potentially affected by changes to worker status, including contractors, consultants and other self-employed individuals
• assessing employment status risk, including how personal service, substitution, control and the ability to negotiate pay operate in practice
• reviewing and redrafting contracts, including substitution clauses and contractor arrangements, so that contractual documentation reflects the intended relationship and working practices
• assessing the potential impact of worker status, including exposure to holiday pay, National Minimum Wage and pension obligations
• reviewing workforce and operating models, including arrangements involving agencies, outsourced providers, platforms and individual subcontractors
• supporting employment status disputes and litigation, including challenges to existing status classifications; and
• developing practical action plans to address identified risks and prepare for the implementation of any reforms