Contractors & the new ‘Single Worker Status’

Ahead of the General Election in July, the Labour Party announced plans to introduce a new ‘Single Worker Status’ with the aim of simplifying employment status for workers and businesses.

In this article we’re going to take a closer look at the plans and what they might mean.

What’s the current landscape for employed and self-employed workers?

Currently there are three types of employment status:

• Employee
• Worker (also known as a contractor)
• Self-employed

Employees

Someone with ‘employee’ status has more employment rights than workers or self-employed people—but they also have more obligations to their employer.

Someone is likely to be classed as an employee if most of these criteria apply:

• They’re required to work regularly, except when they’re on leave;
• Work is consistently available
• They can’t refuse to do the work, unless they have a valid reason
• They’re entitled to paid leave
• They’re subject to the employer’s specific discipline and grievance procedures
• They’re required to give notice if they want to take maternity, paternity or adoption leave
• They cannot subcontract out their work
• Their employer decides how, when and where the employee does their work
• Required materials, tools and equipment are provided by the employer

Here at Warr & Co we have decades of experience in helping contractors with our accounting services. To find out more about how we can help, book a free, no-obligation consultation today and one of our expert team will be in touch as soon as possible.

Worker

People with the status of ‘worker’ are entitled to some employment rights, but not as many as full employees.

Someone is likely to be classed as a worker if most of the following apply:

• Their work is more casual, with less structure and without a regular working pattern
• They’re usually required to personally do the work
• Their working hours are not necessarily regular or guaranteed
• They have few obligations to make themselves available for work, although they should do work when they have agreed to do so

Unlike employees, workers are not typically entitled to a minimum notice period of their employment ending, protection against unfair dismissal, time off for dependants or statutory redundancy pay, while they’re also unable to make statutory flexible working requests.

Self-employed

Self-employed status is actually not defined in employment law, but is a category used by HM Revenue and Customs (HMRC) for tax purposes.

A self-employed person is usually considered to be their own boss, but they have very few employment rights.

Someone is likely to be considered self-employed if they:

• Are responsible for how, when and where they work
• The owner of a Limited company
• Invoice for their completed work rather than getting a wage or salary
• Get contracts to provide services for their clients
• Work for different clients and charge variable fees
• Are able to subcontract someone to do the work for them

The only employment rights self-employed people are entitled to are health and safety protections when on a client’s premises, and protection against discrimination.

Off-payroll work (IR35)

Off-payroll working rules for clients, workers and their intermediaries are important to understand for contractors and the companies that use them. They apply to workers who provide services through their own intermediary, clients receiving those services and agencies that provide them.

IR35 rules are designed to stop contractors working as ‘disguised employees’ by taxing them at a similar rate to normal employment.

READ MORE: IR35 Update 2024: What It Means for Contractors and Businesses

What is Single Worker Status?

The Single Worker Status was outlined in Labour’s ‘Plan to make work pay’ document that was published in May 2024.

The intention of the new framework will be to provide clarity to workers and businesses.

“Labour believes our three-tier system of employment status has contributed to the rise of bogus self-employment, with some employers exploiting the complexity of the UK’s framework to deny people their legal rights,” the document says.

It continues: “ The complexity has meant businesses and workers are reliant on lengthy legal processes to resolve issues.”

The new government’s intention is to transition to a two-tier framework, differentiating only between the genuinely self-employed and all other workers.

These changes could remove the need for IR35 case law, and increase the confidence of clients in engaging contractors they consider to be ‘genuinely self-employed’. If it became easy to differentiate between ‘worker’ and ‘self-employed’, it could also end the need for HMRC’s CEST tool, as well as lead to fewer tribunal cases where employment status is disputed.

 

When could it be introduced?

The Single Worker Status was not mentioned in the recent King’s Speech, and Labour’s Plan to Make Work Pay policy document stated there would be a ‘full and detailed consultation’ on the plans. This means it’s unlikely we’ll see any changes in the immediate future, but businesses that engage contractors, or that wish to do so, should watch this space closely.

 

Here at Warr & Co we have decades of experience in helping contractors with our accounting services. To find out more about how we can help, book a free, no-obligation consultation today and one of our expert team will be in touch as soon as possible.