Government consults on worker status reform and substitution clauses

Background

On 14 October 2026, the Government published a consultation on employment status for employment rights in England, Wales and Scotland. It does not concern tax status. The consultation closes at 11.55 pm on 8 January 2027.

The Government is considering changes to the limb (b) worker test, which currently includes personal service and whether the engager is a client or customer of the individual’s business.

Key proposals

The Government proposes giving greater weight to control alongside personal service. At the proposed second stage of the test, either personal service or significant direction or control could take the case forward; personal service would also be considered at the final stage. The Government considers the ability to set or negotiate pay may be an important factor.

Alternatives include treating a right to use an equally qualified substitute as consistent with personal service, or preventing substitution rights from being the sole or overriding factor. These are options for consultation, not settled changes.

The Government also proposes a presumption of limb (b) worker status in tribunal claims about rights that depend on that status. The engager would have to show the individual was not a worker. This would not apply to employee status. Repeated misclassification after a tribunal has found colleagues in broadly similar circumstances to be workers could become an aggravating factor, potentially attracting a penalty of £100 to £20,000 per claim.

The consultation also seeks views on possible written statements, blacklisting protections and health and safety protections for some self-employed people, as well as the Fair Work Agency’s role and a non-binding online assessment tool.

What should employers do?

These are proposals; the current law remains in force. Businesses engaging contractors may wish to review arrangements where substitution is central to self-employed status, particularly where the engager also controls rates, performance or working hours. They should also keep clear records of how working arrangements operate in practice and consider the potential impact of tribunal decisions on others engaged on similar terms.

For more information or advice, please get in touch with Alice Mennell in our Employment team.