The Background

Let’s consider the current legal categories of worker. First, there are ‘employees’. They are entitled to all the statutory rights (so long as they have been employed long enough).

Then there are the so-called ‘limb (b) workers’. The term derives from the definitions in s.296(1)(b) Trade Union and Labour Relations (Consolidation) Act 1992 and s.230(3)(b) Employment Relations Act 1996. These are workers who have a contract, but not a contract of employment. They only get some of the rights that employees have – for example, national minimum wage and paid holidays. They don’t get protection against unfair dismissal, parental leave, and so on. This is the status that the Uber drivers achieved in their Supreme Court victory earlier this year. Limb (b) workers are common in food delivery, taxi, and other service industries.

Next there are the bogus self-employed workers. These are workers whose arrangements are dressed up to look as if they are self-employed but who, in reality, are employees. Unless they litigate, they are not entitled even to the national minimum wage or paid holidays – not even some health and safety protections. Bogus self-employment is rampant in the construction industry, but by no means confined to it.

Fourth, there are the workers with ‘personal service companies’, (PSCs). These are workers who, usually at the request of the real employer, have had to set up a PSC in which they are the sole employee (sometimes with another worker), a company in which they (or a member of the family) are the major shareholder and director. This is fine for the professionals who use a PSC as a convenience for carrying out their work for clients. But for many, forced by employers to set up PSCs, the device means the absence of effective employment rights. On the face of it these workers have full employment rights – but only against their own company. The real employer is insulated against any responsibility whatsoever for their rights. Such abusive PSCs are common in parcel delivery and construction (and many other sectors).

The Effect of the Bill

Under the Bill, the first three and much of the fourth categories would be merged together and all would be classified as ‘workers’ with all the statutory employment rights (subject to length of service qualifications).

Those who are genuinely self-employed in business on their own account with their own clients and customers will be unaffected by the Bill. These are, by and large, the ‘professionals’. Examples are the owner/taxicab driver (‘mushers’, as they are known in London), the self-employed painter and decorator, the jobbing electrician, the gigging musician, the novelist, the barrister, and so on.

As noted above, some of those who are genuinely in business on their own account have set up a personal service company through which they carry out their work. The Bill is drawn so as to exclude these genuine cases from those compelled to work through a personal service company as a device to avoid what is, in reality, an employment relationship with an employer.

Solving a Growing Problem

The Bill goes beyond the recommendations of the Matthew Taylor Report some years ago – but most people thought that that Report didn’t go far enough anyway.

The problem is a growing one. Some employers are using the excuse of the pandemic to worsen the terms and conditions of their workers (see the spate of recent instances of ‘fire and rehire’). One of the techniques they are using is to downgrade their workers from one category to another to cut the burden of the rights that go with the higher category.

At present it is estimated that there are about 28 million employees, a figure which includes up to 700,000 personal service companies with one employee. It is estimated that there are just under five million self-employed but the statistics do not separate out those who are limb (b) workers, those who are bogus self-employed, and those who are genuinely self-employed. What is clear is that the number of those in PSCs and self-employment is proportionally greater and growing faster than elsewhere in Europe.

The Bill would go a long way to bring the UK back to the single status of ‘worker’, which is the basis of many of the international treaties (e.g. the Conventions of the International Labour Organisation) ratified by and binding on the UK.

Though some opportunistic employers will not welcome the Bill, the Bill would in fact benefit employers generally by preventing greedy or uncaring employers from undercutting good employers who are prepared to allow their staff full employment rights. It would also stop the worst employers free riding on the state by using categories for their staff that avoid the employers having to pay national insurance, tax, and pension contributions.

There will be implications for tax, national insurance and pensions, though these are regulated by other legislation and any undesired consequences will need to be dealt with by those statutory regimes.

Above all, the Bill is obviously intended to benefit workers. It should be welcomed generally for extending employment rights to hundreds of thousands who do not currently enjoy them and protecting those that do from the danger of being downgraded to or being undercut by workers with less rights. Employers often try to persuade workers of the benefits of a lesser status on the basis that it guarantees flexibility. But this is a false argument since legal status has nothing whatever to do with whatever flexibility employers confer on their workers – that flexibility can just as easily be enjoyed by employees, if the employer is prepared to concede it.