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The UK government must act to stop bogus self-employment if its major overhaul of workers’ rights is to succeed, the official tasked with tackling labor exploitation has warned.
Margaret Beels, independent director of labor market enforcement, told the Financial Times in an interview that employers could simply ignore the new obligations on their staff if ministers continue to delay legislation to clarify the status of workers.
“I would like to see a little more urgency. . . You can consult until the cows come home, but sometimes the government just has to make decisions,” Beels said, echoing concerns raised by unions and business groups about the bill’s omission of a critical set of measures to employment rights.
The bill, introduced to parliament last year, includes a series of sweeping reforms to give UK workers more security. But it does not address an issue Labor had previously promised to address: the potential for employers to exploit ambiguities in UK law on the status of workers.
Instead, the government said it would have to consult at length on how to create a simpler framework, with a single employee status and a clear distinction between employed and self-employed.
Beels said there was a risk that leaving the issue until later would allow employers to avoid their new responsibilities by hiring gig workers.
The UK is unusual in having three types of employment status: employees, self-employed and an in-between category of “limb (b)” workers, and it is often difficult to determine how people should be treated.
Workers in the third group have more protections than the self-employed, but lack some important employee rights that the Labor government plans to strengthen through the ERB, such as statutory sick pay, redundancy rights and protection against unfair dismissal.
Crucially, they are treated as self-employed for tax purposes, creating a huge incentive for businesses to use contractors rather than employees, especially following the £25 billion budget increase in employers’ national insurance.
But a rise in bogus self-employment is just one of the dangers Beels sees looming, as the government enshrines new rights into law without yet specifying how much money will be made available to enforce them.
The complexity of UK employment practices, where workers could be recruited by one agency, employed by another and told what to do by someone else, made it difficult for individuals to enforce their rights, she said.
But under-resourced UK enforcement agencies struggle to enforce existing labor market rules. The three main bodies – HM Revenue & Customs’ minimum wage enforcement team, the Gangmasters and Labor Abuse Authority and the Employment Agency Standards Inspectorate – are set to merge into a new Fair Work Agency, with a more wide.
Beels’ role was created by the previous Conservative government to improve coordination between agencies, set their strategy and prepare for this merger.
It proved a frustrating task, she admitted, as ministers repeatedly failed to deliver on their commitment to create a single body.
“I described myself as a kind of John the Baptist figure, saying prepare the way, this great thing is coming. . . and it never came,” said Beels, a former GLAA chairman and former director of Scottish Gas.
The Fair Work Agency is now taking shape under Labor and Beels, whose office will be disbanded when the agency is created, aims to make it a success.
Raising her profile will be crucial. “Transparency is really important. . . workers know what the agency is doing and how effective it is,” she said.
Even without new funding, the creation of a single enforcement body would make it possible to allocate resources more effectively, she insisted.
Funding for the three agencies came to just over £40m in 2023-24 – of which £31.2m was for HMRC’s minimum wage team. Resources for FWA will be determined in this summer’s close spending review.
Existing restrictions meant the GLAA and EAS had not had the capacity to “unpick the stones” and investigate the extent of exploitation in the high-risk construction sector, she said, hinting that resources would be brought under a new strain as the agency’s responsibility would expand. .
Beels put the message in stark terms earlier this month to a cross-party committee of MPs, saying: “If anyone thinks we’re going to raise standards just by throwing three budgets together . . . it’s not like that.”
“There needs to be a step change in addressing the resources available to the fair work agency,” she added.
