The situation

Evidence suggests that employment regulation in the UK creates a labour market that, overall, strikes the balance between providing flexibility for employers, and job opportunities and security for individuals. 

For example, analysis by the OECD finds that employment regulation in the UK is towards the bottom of the league in terms of the protections it provides to individual workers. This relatively light touch labour market framework is associated with a high level of permanent employment by OECD standards. There is also little evidence that employment in the UK is becoming structurally more insecure, given that the proportion of non-permanent employment has remained at about 20% for the last two decades.  

However, the UK’s labour market enforcement system is inadequate both through the individual route via the tribunal system and through the various enforcement bodies. This means many workers continue to be treated unfairly and face discrimination as well as difficulties in accessing justice and receiving compensation if their employment rights are breached. 

There is also a lack of clarity over the issue of employment status and rights, which particularly affects workers in the gig economy. This is evidenced by evolving case law involving companies like Uber and Deliveroo over whether people are categorised as workers or self-employed. 

CIPD viewpoint

The priority for policy-makers interested in improving the effectiveness of employment regulation and strengthening workers’ rights should be reforming and improving the labour market enforcement system. There is little point in introducing new employment protections for workers if existing employment rights are not being enforced effectively. 

Improving enforcement would require a significant increase in the number of inspectors and more proactive inspections of workplaces particularly in high-risk sectors. There would also need to be a much stronger focus on supporting employers – particularly small firms – to comply with employment law, with Acas given more resources and an enhanced role. 

Alongside better enforcement, employment status should be simplified. The best way to do this would be to abolish ‘worker’ status, which CIPD research shows most employers don’t use and often don’t even understand or recognise. This would help clarify and strengthen employment status and rights for some vulnerable groups in the gig economy and across the wider UK labour force. It would also align status for both tax and employment purposes at the same time.

Actions for the UK Government

• Establish a properly resourced Single Enforcement Body with greater capacity to inspect workplaces.
• Increase the resources available to Acas so it can work proactively with more organisations – particularly SMEs - to improve their working practices if they have fallen foul of the law through ignorance or lack of resources.
• Simplify employment status by abolishing ‘worker’ status, which would help clarify and strengthen employment status and rights for some vulnerable groups in the gig economy and across the wider UK labour force.
• Improve awareness of existing employment rights by running a high-profile ‘know your rights’ campaign, working with organisations such as Acas, Citizens Advice Bureau, trade unions and professional bodies, which would set out information on employment status and associated employment rights.

Recommendations for employers

• Ensure the use of non-standard or atypical working arrangements is in response to a genuine business requirement for flexibility, and works for both the organisation and individuals.
• Set out clearly in employment contracts the employment status of atypical workers, and regularly review (at least once a year) the working arrangements in practice to ensure that the reality of the employment relationship reflects what is set out in the contract.
• Provide training/guidance for line managers to ensure they are managing atypical workers in line with their employment status, and in a way that supports mutual trust and respect.
• Provide reasonable notice of work schedules to enable workers to plan ahead.
• Provide atypical workers with reasonable compensation if pre-arranged work is cancelled with little or no notice.
• Seek to provide a range of flexible working practices for employees in permanent roles to help ensure people can manage any caring responsibilities and to support their work-life balance.