New proposals could change self-employment rules
Businesses that engage freelancers, contractors and other self-employed workers may need to review their arrangements following a new Government consultation aimed at tackling bogus self-employment and improving protections for people who are genuinely self-employed.
Bogus self-employment can arise where an individual is described as self-employed, but the practical working relationship suggests that they may actually be entitled to employment protections. The Government estimates that as many as 900,000 people could be affected and is considering whether clearer rules are needed to help businesses and workers understand where the dividing line should be drawn.
The proposals are intended to make employment status easier to determine and could strengthen access to rights such as the National Minimum Wage and paid holiday where someone is, in substance, working as an employee or worker. The consultation also considers whether genuinely self-employed people should receive clearer written information about the terms on which they are engaged.
For businesses, the important point is that the label placed on an arrangement does not necessarily determine the legal position. The way the relationship operates in practice remains important, including the degree of control exercised by the business, whether the individual works exclusively for one organisation and how much freedom they have over when and how the work is carried out.
No immediate change has been made to the law, and the consultation concerns employment rights rather than tax status, which continues to operate under a separate framework. Nevertheless, businesses that make significant use of freelance or contract labour may find it sensible to review their existing arrangements now, checking both the written contracts and the reality of the day-to-day working relationship.
The consultation closes on 8 January 2027, giving businesses time to consider whether any of their current arrangements could become more difficult to justify if the rules are tightened.
