By Kian Mellett
Whilst the majority of people who work in the UK are working as employees under a contract of employment, many businesses engage people as self-employed contractors rather than as employees or workers. The distinction in status matters: employees and workers are entitled to core employment rights from Day 1 of engagement, such as the National Minimum Wage, paid holiday and a workplace pension, while the genuinely self-employed are not.
Under the current framework, one of the most effective ways of demonstrating that someone is self-employed has been a contractual right to send a substitute in their place.
The Government now wants to change this current framework. On 14 October 2026, it published a consultation, ‘Make Work Pay: employment status reform and protections for the self-employed’ proposing two key changes:
- A broader test for worker status –less emphasis to be placed on personal service such that the existence of a right of substitution does not outweigh all other factors that point to worker status, and instead greater consideration to the level of control a business exercises over the individual.
- A shift in the burden of proof – At tribunal, it would be for the business to prove that someone is not a worker and is genuinely self-employed, rather than for the burden of proof to be on the individual.
The stated aim of the consultation is to tackle “bogus self-employment” and “support the self-employed to continue to play an important role” in the wider UK economy. These proposals are for consultation, not immediate changes to the current law and responses to the consultation are due by 8 January 2027.
How this could play out
The Government consultation provides a practical example. Two courier drivers work under franchise agreements that give them a genuine right to send a substitute. Under the current framework test, the right of substitution is enough to defeat their claim at the personal service stage. Under the proposed test, the company’s control over pricing, performance tracking and delivery windows would carry the drivers claim on to the next stage. The tribunal would then have to examine the whole relationship. A substitution clause would no longer end the argument on its own; the tribunal would decide, on all the facts, whether the drivers were genuinely running their own businesses.
Substitution is no longer decisive
Under the existing framework, a limb (b) worker must work under a contract, provide personal service, and not be carrying on a business of their own for a client or customer. A genuine right of substitution alone can therefore defeat worker status. Substitution was decisive in the Supreme Court’s 2023 Deliveroo ruling, which concerned trade union recognition.
The Government’s preferred option would let a tribunal consider personal service and/or significant direction or control at a second step. An individual could only fail at that stage if neither was present. Personal service would not disappear at this stage and instead would be assessed again when deciding whether the individual is genuinely in business on their own account. Alternatives under consideration include lowering the bar for personal service or legislating that substitution cannot be the “sole or overriding factor”. The Government has also asked whether the ability to set or negotiate pay should be a key factor in distinguishing workers from the self-employed.
The burden shifts
The Government proposes to create a ‘presumption of worker status’ at Tribunal modelled on the existing presumption in the National Minimum Wage Act 1998. Rather than claimants having to proving they are worker, the burden of proof would lie with the employers to prove they are not. The presumption would apply only to whether the individual is entitled to the rights in question, not to whether those rights were in fact provided. Further the presumption would not extend to employee status. Tribunals would retain their power to strike out claims with no reasonable prospect of success.
The practical effect of this proposal is significant. Defending a status claim would mean an organisation would be required to produce evidence that the individual is not a worker, rather than simply testing the claimant’s case.
Repeat offenders and the state
The Government consultation also proposes additional penalties for organisations repeatedly failing to recognise status That would apply where an employer contests a claim even though colleagues on broadly similar facts have already succeeded. The tribunal could then impose an additional penalty, currently between £100 and £20,000 per claim, payable to the Secretary of State. The Government is candid that the aim is to discourage employers from defending such repeat claims, and to encourage them to consider the implications of a status ruling across their whole workforce. Separately, it is exploring whether the Fair Work Agency could use its civil proceedings power to bring status claims itself.
A measured view
The proposals are narrower than Labour’s original manifesto commitment to a simpler two-category framework of workers (with a defined set of rights) and self-employed. The three-tier framework of employee, worker and self-employed remains, and the simpler single worker status is now only a “longer-term goal”. The tax framework also remains untouched, leaving the prospect of individuals being workers for employment rights purposes but self-employed for tax, a tension the consultation does not resolve. Companies should therefore avoid assuming that an employment-rights status review automatically resolves the tax position, or vice versa. Any existing IR35 or off-payroll working assessment should still be considered separately. Reforms following the consultation are likely to be some way off, and primary legislation will be needed. Nonetheless, the direction of travel is clear.
What this means in practice
For businesses that engage contractors, freelancers or platform-based workers, the practical points are:
- Map your models – Flag arrangements that depend heavily on substitution clauses while the company determines fees, hours, assignments and working methods. Do not remove genuine substitution rights but instead, identify arrangements in which the substitution clause is supporting self-employed status despite the company controlling how the individual works.
- Make sure the contract matches reality – Compare the contractual terms with actual working practices. Gather evidence of genuine self-employment, such as freedom to set prices, an independent customer base and real business risk. Ensure contracts accurately reflect genuine commercial independence. Train managers not to impose employee-like controls inconsistently with the intended contractor model.
- Treat one adverse ruling as a warning for the whole workforce – If a tribunal finds that one individual is a worker, contesting later claims on broadly similar facts could attract an additional penalty. Assess potential worker-status claims and associated historic liabilities, particularly holiday pay, National Minimum Wage and pension obligations where relevant. Consider the number of individuals engaged under the same model.
- Watch for a written statement duty – Businesses may have to give self-employed contractors written key terms, possibly above duration or value thresholds.
- Monitor the consultation – the consultation closes on 8 January 2027 – monitor the Government’s response and any subsequent legislation before making changes solely in anticipation of the proposed reforms.
Kian Mellett is a Solicitors Qualifying Examination (SQE) student who earned his LL.B. Law, with honors, from University of Leeds in 2024. While completing his studies, Kian works as a paralegal/trainee at Duane Morris in London.