Employment status is at the core of both employment law and the tax system – an individual’s employment status determines the employment rights they are entitled to, and the taxes that they and the organisation they work for must pay. However, there is no alignment between the two systems. For tax purposes there are only two tax statuses: self-employed or employee. Whereas for employment rights purposes an individual has one of three statuses: self-employed, worker or employee. Following the 2017 publication of the Taylor Review of Modern Working Practices, the government launched a consultation in Spring 2018 seeking views about the possible alignment of employment status for tax and employment rights. The government has recently published its long-overdue response to its consultation. In summary, the response confirms:

• It is the government’s view that the existing three-tiered employment status framework for employment rights provides the right balance for the UK Labour Market, by allowing flexibility whilst ensuring workers in more casual employment relationships have core protections such as the minimum wage and the right to holiday pay.
• Whilst the boundaries between the different statuses can be unclear for some individuals and employers, there was no overall consensus about how to achieve effective reform and ‘now is not the right time’ to bring forward proposals for alignment because the benefits of doing so are currently outweighed by the risk associated with legislative reform, which might create cost and uncertainty for businesses at a time where they are focusing on recovering from the pandemic. This will be kept under review as the economy recovers.
• However, there is a need for increased transparency, so that individuals are empowered to claim the rights they are entitled to and so that employers are also clear about their rights and responsibilities. To provide this clarity:
  • three sets of detailed guidance have been published alongside the response: for employers, for individuals and for lawyers/HR professionals; and
  • the guidance on ‘Calculating the Minimum Wage’ has been updated to describe times that are likely to count as ‘working time’ for gig economy workers, such as waiting for a customer after accepting a job.