Although planned changes to the employment status framework do not form part of the Employment Rights Act 2025, the UK Government remains committed to reform in this area.
This blog provides an update on employment status and worker rights and claims.
Government plans to amend tests on employment status
There are currently three categories of employment status: employees, workers and the genuinely self-employed. As part of the Government’s wider objective to ‘Make Work Pay’, there are plans to move towards a single status of worker, with a two-part framework differentiating only between workers and the genuinely self-employed.
All workers, regardless of sector, wage or contract type, would have the same rights and protections. As well as tackling ‘bogus self-employment’, the proposed reforms also seek to strengthen protections for the genuinely self-employed to support their basic rights and reduce insecurity and uncertainty.
The plan is to consult on how a simpler framework can properly encapsulate the breadth of employment relationships in the UK and differentiate properly between workers and the genuinely self-employed. The original intention was to launch a consultation by the end of 2025 - asking for views on the operation of ‘substitution clauses’ amongst other things - but this timeframe has slipped. Given the number of statutory employment rights currently only available to employees, and the impact the changes would have on the tax regime, reform is likely to take some time.
Group proceedings – eCourier worker status claim
Who is a ‘worker’ for employment rights purposes has been the subject of many high-profile disputes in recent years, highlighting the significant shifts in the UK labour market. These cases often arise because only workers and employees are entitled to holiday pay and the National Minimum Wage.
In the next group action set to reach the employment tribunal, 46 drivers have joined the original 15 claimants in bringing a case against eCourier, a Royal Mail owned delivery service. Drivers for the eCourier service are currently treated as self-employed contractors but believe they should be entitled to worker status as their roles do not possess the characteristics of a genuinely self-employed role, particularly due to the level of control alleged to be exercised over their work.
Consultation on umbrella companies
The regulation of umbrella companies is also under scrutiny as part of the Government’s wider workers’ rights reforms.
Umbrella companies are payment intermediaries, typically found in the agency worker supply chain, that employ and pay workers on behalf of employment businesses (recruitment agencies) and end hirers. The Government estimates that around 700,000 individuals currently work through approximately 500 umbrella companies. Concerns have been expressed about the employment rights and tax risks for those working via umbrella companies, which are not regulated by either the Conduct of Employment Agencies and Employment Businesses Regulations (the Conduct Regulations) or the Agency Workers Regulations.
The previous Conservative Government consulted in 2023 on proposals to tackle non-compliance with employment rights and tax by umbrella companies, with the current Government publishing its response in March 2025. Following this a decision was made to amend the Conduct Regulations so that they apply to umbrella companies. The Conduct Regulations establish requirements around the treatment of work seekers (e.g. not withholding pay, not including detrimental contract terms, not preventing transfers to permanent work); as well as information and checks before supplying workers, and record keeping and transparency.
The Government recognises that, more broadly, the Conduct Regulations need to be updated to reflect the realities of the modern labour market - a consultation on modernising the agency work regulatory framework closed on 1 May 2026. The consultation targeted responses on security, transparency about pay and choice. Reform in this area is expected in 2027.
Extension of right to work checks
This focus on clearer accountability and stronger protection for workers in non-traditional arrangements can also be seen in the plans to extend right to work checks to gig economy and zero-hours workers, which we discussed in our earlier blog.
Fair Work Agency
The Fair Work Agency was established in April 2026 as a new single enforcement body for certain employment rights, including in relation to agency workers, employment agencies and employment businesses, National Minimum Wage and holiday pay.
The Fair Work Agency will have extensive new powers, including to compel individuals to attend meetings, answer questions and provide information or documents; enter premises to inspect documents or access computers where necessary for enforcement purposes or to determine non-compliance; issue notices of underpayment to employers going back up to six years; and request a labour market enforcement undertaking. It will also be able to bring employment tribunal claims on behalf of workers who have the right to do so but are choosing not to (e.g. group holiday pay claims).
If you would like more information on any of the above, please contact a member of our Employment and Immigration team.
Contributors
Practice Development Lawyer
Trainee Solicitor
