In an announcement yesterday (July 26), the party said once in power it wants to end “insecure employment”, give all workers rights such as access to statutory sick pay, national minimum wage, holiday pay and paid parental leave, as well as protection against unfair dismissal.
A single status of ‘worker’ would replace the three existing employment categories of employee, worker and dependent contractor and remove qualifying periods for basic rights and protections to give workers day one rights in the job.
Alongside the party’s commitment to extend statutory sick pay for the self-employed, this would make 6.1m additional working people eligible to claim statutory sick pay.
Andy McDonald MP, Labour’s shadow employment rights and protections secretary, said: “Millions of workers are in insecure employment with low pay and few rights and protections, particularly key workers whose efforts got the country through the pandemic.
“A lack of basic rights and protections forces working people into poverty and insecurity. This is terrible for working people, damaging for the economy, and as we have seen throughout the pandemic, devastating for public health.
“We need a new deal for working people. Labour would ensure that all work balances the flexibility workers want with the security they deserve.”
However, the Association of Independent Professionals and the Self-Employed (IPSE) said the proposals “fail to grasp the nettle of employment status”.
IPSE warned without clearly defining what distinguishes “false” from “genuine” self-employment, the proposals risked “seriously undermining” the 4.2m-strong self-employed sector.
Instead of attempting to roll all statuses into one, IPSE has previously proposed writing a statutory definition of self-employment into law – to grant much-needed rights to 'falsely' self-employed people while also protecting the freedom of the genuinely self-employed.
Andy Chamberlain, director of policy at IPSE, said: “While it is absolutely right to try and clear the confusion in parts of the labour market such as the gig economy and secure rights for falsely self-employed people, it is essential to engage with the question of what exactly makes someone self-employed.
"Without this, structural change could threaten the freedom, flexibility and livelihoods of genuine freelancers.
“Instead of attempting to roll all employment statuses into one, we propose clarifying the existing statuses. Because right now, while there are statutory definitions of employee and worker status, there is still no legal definition of self-employed status."
Chamberlain added: “We are pleased Labour is grappling with these issues, but we do not believe this solution cuts to the heart of the matter.
"We are keen to work with the party to develop solutions that would empower falsely self-employed workers, but we must also protect the flexibility of genuine freelancers, which is of great benefit to the UK.”
Concerns around IR35
The announcement comes amid some of the recent concerns around IR35 rules and changes this year.
Introduced in 2000, IR35 is an anti tax avoidance rule that applies to all contractors and freelancers who do not fall under HM Revenue & Customs’s definition of being self-employed.
Since April 6, medium or large-sized private sector businesses have been responsible for deciding their workers' employment status, alongside all public sector businesses.
If the off-payroll working rules (IR35) apply, a contracted worker’s fee will be subject to income tax and national insurance contributions.
HM Revenue & Customs promised not to open a new compliance enquiry into returns for tax years before 2021-22 using information acquired as a result of the changes to the off-payroll working rules, unless it suspected fraud or criminal behaviour.
There were widespread calls for the changes to the private sector to be scrapped altogether, with chairman of the Treasury committee Mel Stride calling for the abolition of the "dreaded" IR35 tax rule in October last year.
It followed findings from a Lords select committee last year which urged the government to "completely rethink" the IR35 rules in a damning report which found the changes would put too great a burden on businesses.
In a report published a few days after the new rules took effect for the private sector in April, the All-Party Parliamentary Loan Charge Group said the government needed to accept the “obvious reality” that IR35 legislation was “fundamentally flawed” in its aim of stopping the promotion and misselling of disguised remuneration schemes.
According to MPs, the IR35 rules had not achieved their aim, but had "ironically muddied the waters and unintentionally made it harder, not easier, to define contracting and freelancing".
Labour's proposal follows a number of key legal cases on the gig economy where the central dispute was whether the claimant was a worker, and thus entitled to the minimum wage and holiday pay, or self-employed.
Dave Chaplin, CEO of contracting authority ContractorCalculator, said: “The Labour proposals are admirable and it could finally put a stop to the zero-rights employment models that have emerged in the flexible workforce which are facilitated by quasi-employment models designed to circumvent the need of corporations to give workers their deserved rights.
“At the lower end of the pay scale, vulnerable workers have little, if any, bargaining power and are given a Hobsons choice to either accept poor working conditions with few rights or get no work at all. This has to stop.”
He added: “But, we must also protect both parties in situations where they have entered into a relationship of self-employment in good faith. Neither should be able to change their mind later causing costly litigation. Also, the taxman’s IR35 legislation should be abolished to remove the uncertainty in the sector which is currently causing mayhem in the market, and pushing workers into unregulated tax avoidance schemes.
“Governments have been consulting on this topic for a decade, and nothing has yet changed. This is a bold and ambitious policy by Labour, who will first need to get into power. We could be a decade away from changes.”
sonia.rach@ft.com
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