Labour’s recently published Employment Rights Bill brings significant changes to the UK’s employment landscape.

While it has been lauded for its worker-focused reforms, it has left several key issues for contractors unresolved.

Understanding how this bill impacts contractors, particularly those operating through umbrella companies or self-employed structures, is crucial for staying compliant and managing your working arrangements effectively.

Here is what you need to know about the bill and its implications for contractors.

No immediate changes to IR35 or umbrella company regulation

One of the biggest disappointments for contractors is the absence of any provisions to address IR35, Off-Payroll Working rules, or the regulation of umbrella companies. Despite earlier discussions of reform, the bill remains silent on these issues.

This means the current rules stay in place, and contractors will need to continue navigating the complexities of IR35 without additional support from new legislation.

If you operate inside IR35, you will continue to pay taxes similar to an employee but without access to employee rights.

The promised consultation on a simpler employment status framework is yet to be scheduled, leaving contractors in a state of uncertainty.

Day-one rights for unfair dismissal

A major highlight of the bill is the introduction of day-one rights for unfair dismissal. Currently, employees must have two years of service to qualify for this protection.

For contractors, this change isn’t directly applicable unless you are considered an employee or work through an umbrella company with employment rights.

While this move is aimed at providing better protection for workers, it may encourage businesses to rely more on flexible, temporary staffing solutions, which could increase the demand for contractors.

This could lead to an uptick in the use of umbrella companies or temporary contracts, so contractors should be prepared to take on more flexible roles as businesses adapt to these changes.

Changes to zero-hour contracts and agency workers

The bill introduces new protections for those on zero-hour contracts (ZHC), including rights to guaranteed hours, reasonable notice, and payment for cancelled shifts.

While these changes are geared towards ZHC workers, they could indirectly affect agency workers and contractors operating in flexible work arrangements.

Contractors engaged through agencies may experience knock-on effects from these reforms, especially if they are paid based on hours worked.

If you work via an umbrella company or through an agency, you may see changes in how your shifts are managed, but the specifics for contractors are still unclear.

Single Worker Status

The idea of a Single Worker Status (SWS) is being floated as part of the bill, which aims to simplify the distinction between employees, workers, and the self-employed. Although there is no clear timeline for when this will happen, a formal consultation is expected.

SWS could simplify the tax and employment rights framework, potentially providing more clarity and rights for contractors, but it is still in the early stages.

Keep an eye on the development of SWS, as it may streamline your employment status and align your tax obligations with your rights.

However, the uncertainty surrounding this consultation means no immediate changes are expected.

Consultation on contractor-specific issues delayed

Despite the excitement surrounding the publication of the bill, key contractor concerns, such as umbrella company regulation and IR35, have been delayed.

Labour has promised to consult on these issues, but no details have been released on when or how these consultations will take place.

This delay leaves contractors in a frustrating position, as many of the long-standing challenges in the sector remain unresolved.

While there is hope that Labour will eventually address contractor-specific issues, you will need to continue managing your current obligations under existing rules until more concrete proposals are put forward.

What should contractors do now?

Although many of the changes in the bill do not directly impact contractors at this stage, it is important to stay informed and prepare for potential reforms. Here are a few steps you can take:

• Review your current arrangements: If you are operating through an umbrella company or self-employed, ensure your arrangements are compliant with the latest IR35 rules and employment law.
• Stay informed about Single Worker Status: Keep an eye on government consultations regarding SWS, as it may impact your employment status and rights in the future.

Labour’s Employment Rights Bill introduces significant reforms, but many of the issues most relevant to contractors – such as IR35, umbrella company regulation, and employment status – have been delayed or left out.

For now, contractors must continue to manage their affairs under the current rules, while keeping a close watch on future developments.

By staying informed and working closely with an accountant, contractors can remain compliant and prepared for the changes to come.