The Government’s employment status response – four plus years in the making – but was it worth it?
By Justine Riccomini, Head of Tax (Employment and Devolved taxes)
29 September 2022
Justine Riccomini asks whether the four and a half year wait since the consultation on employment status was first issued was worth it
In February 2018, four and a half years ago, HMRC, HM Treasury and BEIS published a joint consultation and held a series of expert panels on employment status following the recommendations of the Taylor report of 2017. That report considered, amongst other things, that having two employment statuses for tax (employed/self-employed) and three for employment law purposes was not sustainable. ICAS responded to the consultation and also attended one of the expert panels.
Waiting room
Undoubtedly, there has been a lot going on in the intervening period. Since the Taylor report was commissioned by the Theresa May-led Government, we have had two more Prime Ministers and the UK has had to tackle both the Brexit negotiations and the Covid-19 pandemic. Even so, with most civil servants working from home and Government still on active duty during the pandemic, four and a half years to wait for a response is quite something.
Government response
The main points coming out of the response, which was published on 26 July 2022, are that the current approach to employment status will not be changing for the time being. So we are stuck with employed, self-employed and worker for employment law purposes, and employed and self-employed for tax.
It is likely the judiciary will be the most disappointed with this outcome because it is they who are faced with the almost daily court hearings on employment status.One judge recently gave away what could be taken to be an element of frustration in the different methodologies utilised by courts and tribunals to decide on employment status cases in his decision in Atholl House. He said, “it might be supposed that, and it would certainly be desirable if, there were one clear test or approach to determining whether a person was an employee”. The judgement made it clear that a person’s employment status should not be open to interpretation by subjective application of different, potentially conflicting, tests – this is “intolerable”.
In addition, the Government response stated that a new central resource on employment status has been configured with the aim of helping increase understanding and engagement with the process. Work is also underway to add clarity to terms such as 'working time', which have been shrouded in layers of opacity for many years.
The CEST tool lives on
Possibly the most disappointing aspect was that the announcements appeared to indicate that the CEST tool will not be changing radically – although I understand that some work is going to be done around the issue of those frustrating “unable to determine” outcomes which the CEST tool currently produces on 15% of the occasions it is used to produce a result for tax purposes. Members of the Employment Status & Intermediaries Forum are hoping that stakeholder groups such as this one will be included in any policy work in this regard.
Current conundrums
Of course, since Covid, the landscape of working patterns and for many, locations, has changed yet again – and this time, it seems unlikely things will go back to what they were pre-pandemic. With hybrid and remote working now having become the norm for many, there is another spanner thrown into the mix – flexible working arrangements. A response from the Government on this 2021 consultation is still awaited, and many employers (including ICAS) have since gone on to formulate their own arrangements in that regard. This, together with local Government initiatives to formulate their own plans on the notion of “Fair work” in the absence of any concrete plans by the UK Government, only serve to muddy the waters of the overall employment status picture and may mean it gets pushed further and further into the long grass.
Improved BEIS guidance
One positive thing to report is the publication of improved guidance issued by BEIS which is aimed at different sectors of readership:
- Employment status and employment rights: guidance for HR professionals, legal professionals and other groups
- Employment status and rights: support for individuals
- Employment status and rights: checklist for employers and other engagers
BEIS states that their “detailed guidance is intended to complement existing employment status guidance” and will provide the following help:
- employment status and how it determines the employment rights individuals are entitled to and for which employers are responsible
- factors determining an individual’s employment status
- special circumstances and recent developments in the labour market
- how employment status should be determined for different sectors
- where to go for further information.
All of which it seems can only be a positive thing, albeit it adds to the already considerable volume of reading that an individual, an employer, an HR manager, an employment lawyer, a tax adviser must do to make a robust decision on status.
Conclusion
The only conclusion that one can draw from this is that this matter is definitely not concluded. Employment status is essentially in the same quandary as it was before this Government response was published and thus remains as complex and “intolerable” as ever.
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