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The UK government needs to act to stop sham self-employment if it wants its flagship overhaul of workers’ rights to succeed, warned the official charged with tackling labour exploitation.
Margaret Beels, the independent director of labour market enforcement, told the Financial Times in an interview that employers could simply sidestep new obligations to their staff if ministers continued to delay legislation to clarify workers’ status.
“I would like to see a bit more urgency . . . You can consult until the cows come home, but sometimes government just needs to take decisions,” said Beels, echoing concerns raised by unions and business groups about the omission of a critical set of measures from the employment rights bill.
The bill, introduced to parliament last year, encompasses a sweeping set of reforms to give UK workers more security. But it does not tackle an issue Labour had previously promised to address: the potential for employers to exploit the ambiguities in UK law over workers’ status.
Instead, the government said it would need to consult at length on how to create a simpler framework, with a single status of worker and a clear distinction between the employed and self-employed.
Beels said there was a risk that leaving this issue until later would allow employers to shirk their new responsibilities by hiring gig workers.
The UK is unusual in having three types of employment status: employees, self-employment and an in-between category of “limb (b)” workers, and it is often difficult to establish how people should be treated.
Workers in the third group have more protection than the self-employed but lack some important employee rights that the Labour 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 big incentive for businesses to use contractors in place of employees, especially after the £25bn Budget increase in employers’ national insurance.
But a rise in bogus self-employment is just one of the risks Beels sees looming, as the government enshrines new rights in law without yet specifying how much money will be made available to enforce them.
The complexity of UK hiring practices, where workers could be recruited by one agency, employed by another and told what to do by someone else, made it hard for individuals to enforce their rights, she said.
But the UK’s thinly resourced enforcement agencies struggle to enforce existing labour market rules. The three main bodies — HM Revenue & Customs’s minimum wage enforcement team, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate — are set to be merged into a new Fair Work Agency, with a wider remit.
Beels’ role was created by the previous Conservative government to improve co-ordination between the agencies, set their strategy and prepare for this merger.
It proved a frustrating task, she acknowledged, as ministers repeatedly failed to follow through on the commitment to create a single body.
“I described myself as a sort of John the Baptist figure, saying prepare the way, this great thing is coming . . . and it never came,” said Beels, a former chair of the GLAA and former director of Scottish Gas.
The Fair Work Agency is now taking shape under Labour, and Beels, whose own office will be disbanded when the agency is created, is intent on making it a success.
Boosting its profile will be crucial. “Transparency is really important . . . workers knowing 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 all three agencies totalled little more than £40mn in 2023-24 — of which £31.2mn was for HMRC’s minimum wage team. Resourcing for the FWA will be determined in this summer’s tight spending review.
Existing constraints meant the GLAA and EAS had not had the capacity to “lift the stones” and investigate the extent of exploitation in the construction sector, flagged as high risk, she said, hinting that resources would come under new strain as the agency’s remit expanded.
Beels gave this message in clear terms earlier this month to a cross-party committee of MPs, saying: “If anyone thinks that we will raise standards simply by throwing three budgets together . . . that is not the case.”
“There needs to be a step change in addressing the resources available to the fair work agency,” she added.