The UK government is preparing new measures to tighten regulations around gig economy employment, aiming to curtail practices it considers "bogus" self-employment. Business Secretary Jonathan Reynolds announced plans to close legal loopholes that allow companies to classify workers as self-employed, thereby limiting their access to minimum wage, holiday pay, and other employment benefits.
Reynolds revealed the proposals during last week’s Labour Party conference, with a formal consultation expected to launch this month. The government plans to shift legal emphasis away from the "personal service" test, which assesses whether contracts require individuals to perform work personally or permit them to appoint substitutes. This test has played a pivotal role in recent court rulings involving gig economy firms such as Deliveroo and Uber.
Deliveroo successfully defended its model in a Supreme Court case by citing a contract clause that allows couriers to rent out or lend their accounts, underlining that riders can set their own hours, reject jobs without penalty, and work for competitors. Uber has a similar provision for its Uber Eats couriers, although its ride-hailing drivers were classified as workers following a separate landmark Supreme Court decision in 2019.
These substitution clauses, initially seldom used, have fostered a significant secondary market where riders sell access to their accounts. This practice has fueled concerns over undocumented migrants increasingly being involved in gig work. The government estimates that around 100,000 individuals currently categorized as self-employed could gain enhanced worker rights if the proposals proceed.
A key objective of the consultation is for courts to prioritize the factual nature of the working relationship over contractual wording, aligning with recommendations from the Trades Union Congress earlier this year. Additionally, the government plans to introduce a legal presumption in favor of worker status when disputes reach employment tribunals. While this would not alter the statutory definitions of employment categories, it could lower barriers to enforcement.
Legal experts have mixed views on the potential impact of these measures. Paul Jennings, a partner at Bates Wells who represented drivers in the Uber Supreme Court case, described the proposals as potentially significant for gig economy labor. However, some, like Caspar Glyn, former chair of the Employment Lawyers Association, contend that tribunals already consider the practical realities of substitution clauses, and more fundamental legislative reform would be necessary to address "bogus self-employment" comprehensively.
The government is not proposing changes to the tax status of self-employed workers nor intends to advance a manifesto commitment to dismantle the current three-tier employment system—comprising employees, workers, and self-employed contractors. Unions advocate for replacing this framework with a single "worker" status to simplify rights and protections. Business groups argue that such a reform might inadvertently increase self-employment classifications rather than elevate workers to employee status.
Sinead Casey, a partner at Linklaters, remarked that the government is not pursuing the "deepest potential structural fix" at this stage. Meanwhile, Deliveroo and Uber declined to comment on the new proposals but have recently tightened enforcement of substitution clauses amid broader Home Office immigration rules requiring rigorous right-to-work checks across supply chains.
Employment law adviser Darren Newman emphasized the need for more immediate action, suggesting that empowering the government’s new Fair Work Agency with sufficient resources to enforce existing rules would have a more tangible effect than legislative changes. He noted that the current tribunal system is increasingly difficult to navigate for workers seeking redress and observed that by the time new laws take effect, automation in delivery services may have advanced significantly.