Labour’s hesitation on single worker status is an open goal for exploitative bosses

Employment status is too complex. Many workers and smaller businesses do not know the subtle, but legally consequential differences between the three types of status. And all too often unscrupulous employers abuse this confusion by misclassifying workers as self-employed to deny them rights and pay less tax.

Unless the government makes good on its promise for a single worker status, a boom in contracting and bogus self-employment could be on the horizon. While the Employment Rights Act 2025 grants employees and limb (b) workers expanded protections, these changes are only meaningful if workers can access them. On top of this, recent increases to National Insurance contributions and the National Minimum Wage are already putting financial pressure on employers. There has never been a greater incentive for businesses to wriggle around the rules to relabel workers as self-employed, fire staff or increase reliance on contractors. 

Labour committed to creating a single worker status in its Plan to Make Work Pay, but enthusiasm for this imperative legislative change is waning. A recent Westminster Hall Debate on the issue was scantly attended, and a promised consultation is yet to materialise. Time is running out for Labour to reform the framework, so that all workers can access their rights.

What is a single worker status?

There are currently three types of employment status:

• Employee. They have access to the full range of employment rights.

• Limb (b) worker. This status is defined in the Employment Rights Act (ERA) 1996. Commonly referred to as ‘workers’ and have access to most statutory employment rights, but for example, not redundancy pay, notice for dismissal, or unfair dismissal rights.

• Self-employed. They have access to some rights outside of employment legislation (for example, access to a workplace compliant with health and safety regulations).

The case law that is used to identify a worker’s employment status is complex and difficult for the average person to understand. Single worker status simplifies the system by combining the employee and limb (b) worker statuses into one, envisioning the same rights for all people doing work for an employer. Self-employment would remain a distinct category.

For those unwittingly downgraded into bogus self-employment, the road to proving their correct status is tough. Only a judge can legally decide one’s employment status, requiring workers to pursue years of litigation in the Employment Tribunal. Many workers choose to avoid the financial and psychological costs involved and put up with their situation. In sectors like construction, false self-employment has become institutionalised even within the largest contractors, such as the disgraced mega-builder Carillion.

Single worker status could benefit all

The need for employment status reform has been acknowledged across party lines – it was recommended by the Taylor Review in 2017, formed part of the Conservatives’ Good Work Plan in 2018, and was the subject of several Private Member’s Bills since 2019.

There are three main arguments for having just one status. First, simplifying the framework reduces the risk of unintentional worker misclassification, when businesses and individuals are unaware of the legal differences between statuses. This confusion normally results from workers assuming they have fewer rights. 

A single worker status would also make it more difficult for unscrupulous employers from easily passing off limb (b) workers as self-employed, a highly prevalent trend in sectors like construction, postal services and cleaning. A recent BBC Radio 4 programme outlined how this can happen in detail.

Second, a single worker status can create a level playing field for business. At a dedicated Westminster Hall Debate, Justin Madders MP, Kate Dearden’s predecessor as Minister for Employment Rights and Consumer Protection, highlighted that companies exploiting the current framework “treat their workforce as ultra-disposable commodities”. He concluded that he does “not believe that is fair competition”, with compliant businesses being undercut in a “race to the bottom”.

Finally, because self-employed individuals and contracting businesses pay less tax, making classification of staff as contractors more difficult could bring billions in tax revenue for the Treasury.

There is a cost to the limited action from Labour

In its Plan to Make Work Pay, Labour sought to address the long-standing issue of false self-employment by creating a single worker status. This would combine employees and limb (b) workers into a single worker status distinct from self-employment. With the passing of the Employment Rights Bill granting limb (b) workers expanded protections, the stakes are now higher than ever for those workers falsely labelled as self-employed.   

But this doesn’t have to be the case. Addressing the issue of employment status is an important part of Labour’s Plan to Make Work Pay. And while a consultation was not delivered in the first year of this Parliament, Kate Dearden remains “committed to publishing a consultation on [Labour’s] plans to tackle employment status problems”.

But commitment is no substitute for legislation. An implementation timeline for the Employment Rights Act 2025 shows that some measures have already been introduced, while other new and expanded rights will come into effect over the next year. 

Labour must move forward on this issue

Experts in the field have already done some of the legwork. A recent briefing by Lord John Hendy proposes the wording for a draft bill to create a single worker status. This offers a solid platform to kick off the legislative process.

Our concern is that the issue won’t be addressed without proactive government pursuit. A recent Westminster Hall Debate on the issue gathered only about a dozen MPs, so parliamentary pressure on the government is highly unlikely. To avoid having businesses falsely reclassifying workers as self-employed or firing staff to outsource their work, the government must take urgent action. As Margaret Beels, the former Director of Labour Market Enforcement (DLME), aptly remarked: “you can consult until the cows come home, but sometimes government just needs to take decisions”.