Responding to the employment status framework consultation outcome, the UK government has concluded that now is not the right time to bring forward proposals for alignment between the employment status frameworks for employment rights and tax. The government has instead published new guidance which aims to bring greater clarity around employment status for employment rights purposes, although HMRC’s Check Employment Status for Tax Tool and guidance have not been updated.
The response includes a number of other highlights:
Tax law
Employment status for tax purposes can be straightforward, but the government accepts that in borderline cases status determinations can be complex. Further uncertainty can arise from the different treatment of employment status for employment and tax purposes, potentially presenting a risk to the Exchequer where individuals are incorrectly classified.
Although greater alignment of employment law and tax law on employment status could bring benefits, the consultation revealed there is no general consensus around alignment. The risks of reform outweigh the potential benefits, particularly in the short term as businesses recover from the pandemic. ‘Now is not the right time to bring forward proposals for alignment between the two frameworks’.
In the longer term, the government will ‘work closely with stakeholders to explore longer-term options to improve the employment status system for tax to ensure it is as clear as possible and usable for all parties’.
Employment law
In terms of employment status for employment law purposes, the three-tiered employment status framework (i.e. self-employed, worker, employee) provides ‘the right balance’ by allowing flexibility for both employers and individuals, while ensuring workers in more casual employment relationships have core protections such as the minimum wage and the right to holiday pay.
Increased clarity would empower individuals to ‘claim the rights they deserve’, according to the government, and also help employers understand how the law works in practice. New employment status guidance, published alongside the consultation response, aims to provide greater clarity for employees, employers and legal and HR professionals.
Responding to the employment status framework consultation outcome, the UK government has concluded that now is not the right time to bring forward proposals for alignment between the employment status frameworks for employment rights and tax. The government has instead published new guidance which aims to bring greater clarity around employment status for employment rights purposes, although HMRC’s Check Employment Status for Tax Tool and guidance have not been updated.
The response includes a number of other highlights:
Tax law
Employment status for tax purposes can be straightforward, but the government accepts that in borderline cases status determinations can be complex. Further uncertainty can arise from the different treatment of employment status for employment and tax purposes, potentially presenting a risk to the Exchequer where individuals are incorrectly classified.
Although greater alignment of employment law and tax law on employment status could bring benefits, the consultation revealed there is no general consensus around alignment. The risks of reform outweigh the potential benefits, particularly in the short term as businesses recover from the pandemic. ‘Now is not the right time to bring forward proposals for alignment between the two frameworks’.
In the longer term, the government will ‘work closely with stakeholders to explore longer-term options to improve the employment status system for tax to ensure it is as clear as possible and usable for all parties’.
Employment law
In terms of employment status for employment law purposes, the three-tiered employment status framework (i.e. self-employed, worker, employee) provides ‘the right balance’ by allowing flexibility for both employers and individuals, while ensuring workers in more casual employment relationships have core protections such as the minimum wage and the right to holiday pay.
Increased clarity would empower individuals to ‘claim the rights they deserve’, according to the government, and also help employers understand how the law works in practice. New employment status guidance, published alongside the consultation response, aims to provide greater clarity for employees, employers and legal and HR professionals.
