On 14 October 2026, the Government published a consultation paper on employment status as part of its Make Work Pay initiative. The Government has positioned this as an attack on what it describes as bogus self-employment.
Despite prior indications that the Government was looking at moving towards a single worker status, the consultation has a much narrower focus. Although the consultation describes single worker status as ‘a longer-term goal’, the Government also acknowledges that the current limb (b) worker status can give flexibility to both workers and business.
As a result, rather than constituting the full overhaul that some had been hoping for, the consultation focuses on what the Government describes as a ‘targeted reform of employment status’. The consultation makes specific proposals affecting limb (b) workers and the genuinely self-employed, including:
de-emphasising the focus on personal service in the worker test;
introducing a presumption of worker status; and
the introduction of new protections for the self-employed.
The consultation focuses on employment rights and does not address tax status. The two regimes do not fully align. Businesses therefore need to consider separately whether Off-Payroll Working Rules need to be applied to those providing services to them (for example, any ‘IR 35 contractors’) from a tax perspective, while at the same time considering what employment law rights, if any, they may have under the proposed new rules in the consultation paper. Conversely, there is a continuing risk of non-alignment for ‘IR 35 contractors’ and others, with some individuals being treated as employees for tax purposes whilst not receiving any employment law rights.
The consultation remains open until 8 January 2027.
A reminder of the current position
Existing employment law recognises three separate categories for employment rights purposes:
(what are rather uninformatively referred to as) limb (b) workers; and
self-employed individuals.
To be an employee, three principal requirements must be satisfied (although all aspects of the contractual relationship should be considered to assess whether this is an employment relationship). These are (i) personal service; (ii) mutuality of obligation and (iii) control. An employee has the most extensive rights but also the most responsibilities and obligations towards their employer.
The test for determining whether someone is a worker is set out in section 230(3) Employment Rights Act 1996. A worker for these purposes is either an employee or, broadly (under the second limb (limb (b)) of section 230(3)), someone who undertakes to do or perform personally any work or services for another party to the contract in a relationship that is not one of client or customer. This is why a non-employee worker is often referred to as a limb (b) worker. Certain core employment rights are extended to limb (b) workers (including rights relating to the National Minimum Wage and paid annual leave).
The consultation acknowledges that describing someone as a limb (b) worker is confusing, so one of the questions asked is whether a different description should be used.
A self-employed individual for employment purposes is someone who undertakes work but does so with fewer personal obligations and significant flexibility in their work and/or who delivers a service to a customer or client as part of a business or professional undertaking. The self-employed enjoy the least employment-related protection.
The consultation paper does not directly address the position of employees and focuses principally on the limb (b) worker test and whether further (albeit still relatively limited) protections should be accorded to the self-employed.
Proposed changes to the worker test
The consultation proposes to place less emphasis on the personal service element of the limb (b) worker test. The principal concern from the Government’s perspective is that a right of substitution (i.e. the right for the individual to substitute someone else to perform the relevant service from time-to-time) plays too significant a role in determining whether someone is a limb (b) worker and is sometimes incorporated in contractual arrangements to avoid obligations to provide individuals with limb (b) worker rights. The Government considers that personal service should continue to be an important consideration in determining employment status but does not believe that the personal service test should play as critical a role as it currently does in assessing whether someone is a limb (b) worker.
The consultation suggests that various options have been considered for achieving this. One option was to remove the personal service element altogether, but the Government accepts that someone who is not required to work personally for an engager should not be viewed as a worker. An alternative option, which the Government is seeking views on as part of the consultation, is to provide that personal service should be considered alongside control. Under this approach, an individual would potentially be a worker if they either personally provide services and/or are under a significant level of direction or control by the employer/engager. If either or both these factors is satisfied, an individual would then be a worker unless they are carrying on a business or profession on their own account and the other party to the contract is a client or customer of that business or profession.
The consultation gives a practical example of how this approach might work, looking at the position of a delivery driver working under a franchise agreement who asserts worker status/. Under current rules, although the driver provides services under a contract (the franchise agreement), if the contract contains a genuine right of substitution (even with a requirement for training, vetting and licensing checks) the driver will not be a worker. By contrast, if control became a more important factor, the right of substitution alone would not be determinative. If the recipient of the services can exert significant control over how the services are provided (for example, by setting pricing structure, tracking performance, and setting collection times and delivery windows), the individual could still be a worker regardless of there being a right of substitution.
The Government recognises the importance of identifying which aspects of control are key to the relationship and what weight should be applied to different aspects of control. The Government believes that the ability to set the rate of pay or negotiate pay rates is a key factor in differentiating between limb (b) workers and the self-employed and that further consideration should be given to this as part of the limb (b) worker test and seeks views on this as part of the consultation.
Alternatively, the Government suggests that a different approach could be taken to the power of substitution. When assessing personal service, the courts will look at whether the right to substitution is fettered/unfettered. An unfettered right to substitution is considered inconsistent with personal service. A right of substitution limited only by the need to show that the substitute is as qualified as the contractor to do the work, is, subject to any exceptional facts, also considered inconsistent with personal service. The consultation paper states that one option is for the Government to revise the position so that any right of substitution limited only by the need to show that the substitute is as qualified as the contractor to do the work would be treated as consistent with personal service. Views are sought on whether this would be a better approach.
As a further alternative, the Government notes that it could instead legislate so that the existence of a right of substitution does not outweigh all other factors that point to worker status (for example by clarifying that a right of substitution is not the sole or overriding factor in preventing someone from meeting the limb (b) worker test).
Although the Government has set out a number of potential alternatives, they all focus on the same goal, to dilute the personal service requirement. This means that businesses will no longer be able to point solely to powers of substitution to demonstrate that an individual is not a limb (b) worker. As a result, there is a significant risk that organisations will find a greater number of those with whom they contract will need to be treated as limb (b) workers and accorded additional rights. The greatest impact is likely to be felt in the gig economy, including delivery services, as well as the care and construction sectors. Those who regularly use freelancers may also need to consider their arrangements carefully. Regardless of the alternative chosen, the proposed changes will not make the practical application of the test to a given set of facts any more straightforward.
The burden of proof – the presumption of worker status
The only way to get a definitive and binding determination of someone’s employment status is through bringing a case to the employment tribunal. The Government is concerned that some businesses exploit uncertainties to their advantage and intentionally label workers as self-employed when they are not and considers that more can be done to make the process less onerous for affected individuals concerned, and to enable and encourage business to comply with the law without being taken to tribunal.
Under current rules, the burden of proof falls on an individual claimant to show that they are a limb (b) worker and not self-employed. This reflects the standard approach, that if you wish to demonstrate an entitlement to something, the burden of proof falls on you to produce the necessary evidence to establish the entitlement. The consultation paper proposes to reverse the burden of proof, so that in any proceedings it would become the responsibility of the engager to show that the individual is not a limb (b) worker. In other words, the starting point in any claim is that the business would be assumed to have engaged the individual as a limb (b) worker.
The businesses likely to be at greatest risk from any such change are those engaging large populations of limb (b) workers, where claimant law firms have historically sought to recruit claimants to pursue large group claims. Any shift to a presumption of worker status might further encourage those recruitment efforts. Even businesses with smaller limb (b) populations may of course face claims from individual claimants, and those businesses will find themselves on the back-foot if a claim is brought following the introduction of a presumption of worker status. It will therefore become even more important for an engager to compile and maintain sufficient information about the nature of the relationship to enable it to rebut the presumption that the individual is a limb (b) worker. If it fails to so, it could face retrospective liabilities for a range of rights, including National Minimum Wage/National Living Wage and paid annual leave.
To provide further protection for workers, the Government is also proposing a couple of additional changes. These include the introduction of increased penalties where tribunals have found a particular business or organisation to have repeatedly misclassified their workforce. Section 12A of the Employment Tribunals Act 1996 already contains a power for a tribunal to impose a penalty (payable to the Secretary of State) when a breach has ‘one or more aggravating features’. To date, the power has been little used – the consultation paper suggests that between 2014 and 2019 only 50 penalties were levied in over 55,000 successful tribunal claims. The consultation now proposes to amend the 1996 Act to establish that repeated failures by an employer to recognise employment status constitutes an aggravating factor in any breach. This will set out explicitly that if employers choose to argue that someone does not have limb (b) worker or employee status, despite a tribunal having previously ruled that their colleagues do have that status (where the facts of their colleagues’ employment are broadly similar to those of the claimant’s employment) the tribunal can order the payment of an additional penalty, currently of between £100 and £20,000 per claim. There may be a concern that arrangements regarded by a business as meaningfully different could nevertheless be viewed as ‘broadly similar’ by a tribunal. We await further guidance on how a broadly similar test might be applied.
The role of the Fair Work Agency
The Employment Rights Act 2025 includes a power for the Secretary of State to make affirmative regulations to expand the list of labour market legislation which falls within the remit of the Fair Work Agency’s enforcement function. The consultation indicates that the Government is considering making such regulations in relation to worker status matters, allowing the Agency to bring cases in place of an individual or group of individuals, to clarify their employment status.
New protections for the genuinely self-employed
The Government is keen to mitigate the risk that proposals to strengthen protections for the self-employed could add further complexity to the existing employment status framework. Nevertheless, the consultation also proposes the introduction of additional protections for genuinely self-employed individuals.
The suggestions proposed include:
a requirement for a written statement for all self-employed individuals (although the consultation paper acknowledges this could raise practical challenges and asks whether the requirement should only apply to arrangements above a specified value or which exceed a minimum duration);
the extension of black-listing protections to the self-employed; and
health and safety protections, including protecting the self-employed from suffering detriment where they take appropriate steps to protect themselves or others from serious and imminent danger in the workplace.
The list is relatively limited, but a concern for businesses will be whether the introduction of these specific protections could set a precedent for further protections in future, significantly increasing the compliance burden for business.
Conclusion
In various respects, the scope of the consultation is relatively narrow. There is no movement towards single worker status. The points raised are likely to have a limited effect on organisations that primarily rely on employees.
However, even though the consultation raises only a limited number of proposals, their implications are likely to be more significant for organisations with large numbers of consultants or self-employed workers. In addition to an increased administrative burden in relation to self-employed workers, the combined effect of a reversal of the burden of proof and the de-emphasis of the personal service element of the limb (b) worker test could lead to an increasing number of individuals being able to assert an entitlement to limb (b) worker statutory rights.
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