Employment Status: Three Labels, One Big Risk

Employment law continues to evolve, driven in part by reforms under the Employment Rights Act 2025 (the Act). In 2021, the Labour Party committed to simplifying employment status and consulted on moving towards a single status of worker, leaving only workers and the genuinely self‑employed. However, reform of the employment status framework is not included in the Act, and the current framework continues to rely on three distinct statuses: employee, worker and self-employed.

Although the Government still intends to consult, no timetable has been confirmed. For now, tribunals continue to decide status, which in turn determines access to key rights such as national minimum wage, holiday pay and whistleblowing protection.

Recent case law underlines how fact‑sensitive these assessments can be.

The legal framework: three statuses with blurred boundaries

Employee, worker and self‑employed remain the three core statuses, but the boundaries are increasingly difficult to apply to modern arrangements, including the gig economy and flexible staffing models.

In practice, tribunals look beyond contractual labels and focus on:

• Control
• Mutuality of obligation
• Personal service

This can leave employers uncertain about status and exposed to backdated liabilities and claims.

Employment status in practice: sector-specific challenges, zero hours contracts and the gig economy

Sector specific challenges

Sector working practices vary widely, so applying a single, consistent approach to status can be difficult. Where flexibility, seasonal work, project work or intermediaries are common, employers can be exposed to claims and reputational risk if arrangements are later reclassified.

Construction and engineering

Labour-only subcontracting and CIS arrangements can blur who the engager is and whether personal service is required. Risk increases where individuals work set hours, are supervised, or are integrated into site teams.

Social care and healthcare

Regulatory requirements often drive significant control over shifts, training and standards. Sleep-in/on-call arrangements, travel time and bank staffing can lead to disputes on working time, status and pay.

Hospitality, retail and events

Casual and seasonal staffing is common. Regular patterns of work, expectations to accept shifts, or ongoing umbrella arrangements can support employee status over time.

Media, entertainment and creative industries

Project-based freelancing may sit uneasily with exclusivity and close direction on productions. Repeat bookings and personal performance can strengthen worker arguments.

Professional services, IT and consultancy

Contractors can become embedded in teams and managed like employees, especially on long engagements. The more integrated the role, the harder it is to sustain genuine self-employment.

Education and training providers

Peripatetic teachers, tutors and associates may work across organisations, but timetables, performance oversight and limited substitution can point towards worker status.

Agriculture and seasonal work

Short-term peaks often drive agency and informal arrangements. Poor documentation and supervised, fixed-hours work can increase misclassification risk.

Zero hours’ contracts

Casual and zero‑hours contracts are sometimes used interchangeably, and status (and therefore rights) can be difficult to determine.

Whether an individual is an employee or a worker will depend on factors such as:

• Whether they provide their work personally.
• The degree of control exercised by the employer.
• Whether there is an obligation to offer and accept work (‘mutuality of obligation’).

Genuinely casual arrangements are less likely to create employee status because there is typically no obligation to offer work and no obligation to accept it.

Zero‑hours contracts may point more strongly to employee status where, in practice, individuals are expected to accept work when offered.

Tribunals will still focus on reality, so a ‘casual’ contract can be reclassified depending on how it operates in practice.

The Gig Economy

The growth of the gig economy has made status harder to determine for employment rights and tax purposes. Recent cases show how fact‑specific the analysis remains.

• In Uber BV v Aslam (2021), the Supreme Court held that drivers were workers for the purposes of the Employment Rights Act 1996 and entitled to minimum wage and working time rights. Key factors included Uber setting fares, restricting acceptance rates, and exercising significant control over service delivery.
• In Addison Lee Ltd v Lange (2021), the Court of Appeal found drivers were workers: while logged on, they were expected to accept jobs and could face sanctions for declining, notwithstanding contract wording.
• In the Employment Tribunal case of Bandi and others v Bolt (2021), drivers were held to be workers. Drivers had no real ability to negotiate terms, did not contract directly with passengers, and were treated as working for Bolt when the app was on in their licensed area.

Not all gig arrangements result in worker status however. For example:

• In IWGB v RooFoods (Deliveroo), the Central Arbitration Committee held that a broad right of substitution meant there was no personal service, so riders were not workers for trade union recognition purposes (upheld on appeal).
• In B v Yodel, the European Court of Justice indicated that a courier with a genuine right to substitute was likely to be self‑employed.

Proactively addressing employment status concerns

Taking practical, documented steps to review engagements and align contracts with reality can reduce disputes, enforcement action and backdated liabilities. Employers should however take legal advice before changing engagement models due to risks that can arise when doing so.

Practical initial steps include:

1. Audit your workforce

• Review contractor, freelancer, platform-worker and zero‑hours arrangements against day‑to‑day working practices.
• Where misalignment is identified, quantify potential exposure (including for pay, holiday and working time liabilities).

2. Strengthen risk management

• Build status assessments into recruitment and review it as roles evolve.
• Prepare for increased scrutiny as the Fair Work Agency is established in 2026 and awareness of rights grows.

3. Train managers on the practical impact

• Train managers to distinguish contractual wording from the practical reality of the relationship.
• Ensure day‑to‑day management is consistent with the intended status and associated obligations.

A proactive approach is essential to managing employment status risk

Employment status turns on the reality of the relationship, not the contractual label. In sectors reliant on flexible labour, risk is likely to remain high as case law develops and scrutiny increases. Employers should regularly review working practices, keep documentation aligned with how engagements operate, and build status into workforce planning to reduce liabilities (including holiday pay and minimum wage) and limit disputes and reputational harm.