The employment status question facing Andy Burnham

Andy Burnham is now Prime Minister. After winning the Makerfield by-election in June with 55 per cent of the vote, then taking the Labour leadership on the back of union backing and 349 MP nominations, he walked into Downing Street on 20 July 2026 and promptly sprang a surprise by naming John Healey as Chancellor.

So the speculation is over and the governing begins. For the UK's independent workforce, and for the recruitment agencies whose entire model depends on it, one long-delayed question now sits squarely on Burnham's desk: what does employment status actually look like under this government?

This is not an abstract policy debate. How Burnham handles employment status will shape whether the flexible labour market grows or shrinks over the next few years, and agencies should be paying close attention to which way he leans.

Why this matters more than the headlines suggest

Employment status is the plumbing of the flexible economy. Get it wrong and you either strip protections from vulnerable gig workers, or you crush the genuinely self-employed under rules built for full-time employees. Get it right and you unlock growth. That is the tightrope Burnham has inherited, and it is worth being honest that no government in a decade has managed to walk it.

The Matthew Taylor review of modern working practices in 2017 produced a stack of recommendations that led nowhere. A comprehensive consultation in 2018 covered enormous ground across tax and employment law and resulted in no new legislation. Labour came to power in 2024 promising a "single worker status" and then went quiet. The flagship Employment Rights Bill became the Employment Rights Act 2025 without so much as mentioning employment status reform. In July 2025 Labour peer Baroness Jones told the Lords that a consultation would land before the end of that year. As of mid-July 2026, it still has not appeared.

That history matters, because it tells you the honest odds. The default outcome for employment status reform in this country is delay, not delivery.

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What single worker status actually proposes

Labour's original pitch was to collapse the current three-tier system into something simpler. Right now the UK recognises three categories, each with different rights and tax treatment:

Employees work under an employment contract, hold the full set of employment rights, and are taxed at source through PAYE. Workers have a contract to provide services personally but only get a limited set of rights, so no protection against unfair dismissal and no statutory sick pay, for example. The self-employed run their own business, sit outside PAYE, and forgo employee rights in exchange for independence.

Single worker status would fold employees and "workers" into one bracket, granting the whole group a baseline of protections: minimum wage, holiday pay, statutory sick pay, protection against unfair dismissal, and the right to unionise. The genuinely self-employed would, in Labour's stated plans, keep their status.

On paper it is a tidy fix for the gig economy problem, where people have been labelled independent contractors and left without holiday pay or the minimum wage. The trouble starts when you ask what it does to people who chose self-employment on purpose.

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The contracting impact: flexibility is the thing at risk

Here is the core tension, and it is one Raise sees play out every week across the recruitment supply chain.

At one end you have people pushed into insecure self-employment who genuinely need protecting. At the other you have skilled contractors who actively want to be independent, understand the risks, and have often been forced into being treated as employees for tax purposes anyway because of IR35. A reform aimed at the first group can do real damage to the second.

The worry is straightforward: single worker status could strip out the flexibility that makes independent work worthwhile, replacing it with a more rigid framework modelled on permanent employment. If you regularise everyone into an employed-style bracket, you raise the cost and reduce the appeal of engaging contractors at all. That is not a hypothetical. We have already watched it happen with IR35, where risk-averse clients responded to the 2021 private sector reform with blanket bans on limited company contractors rather than assess status case by case.

And this is where I would flag a real risk with Burnham specifically. His instincts run further left than the front bench he replaces. He built his reputation on collective bargaining, worker protections and a delivery-rider charter in Greater Manchester. That is a mindset oriented towards bringing people into the protected fold, not preserving carve-outs for the self-employed. His campaign did float cutting employers' national insurance and business rates, which points to a business-friendly streak, so it genuinely could cut both ways. But if you are betting on the direction of travel, a Burnham government is more likely to widen the net around disguised employment than to loosen it.

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The elephant in the room: aligning tax status and employment status

You cannot talk about employment status honestly without addressing tax, and this is the part most coverage skates over.

Employment status for rights and employment status for tax are two separate systems. Rights disputes go through employment tribunals. Tax disputes go through tax tribunals. They share some underlying law but are otherwise distinct, which produces an absurd result: the "worker" category does not exist in tax law at all, leaving those people in a no-man's-land. In 2022 the then-Conservative government explicitly ruled out aligning the two as part of any status changes.

Any reform that fails to align rights and tax will not deliver the simplification everyone claims to want. But alignment is also where the political danger lives. If a single worker status for rights were mirrored on the tax side, a large population of contractors could find themselves reclassified as employed for tax, which is IR35's effect by another name and on a far bigger scale. Simplification and contractor freedom are not automatically the same thing, and the detail is where the flexible workforce either survives or gets squeezed.

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The strategic picture for recruitment agencies

For agencies, this is not a compliance footnote. It is a question about the size and shape of the market you operate in.

The commercial reality is that agencies make money from friction and flexibility in the labour market. Anything that shrinks the pool of engageable contractors, or pushes more of them onto payroll, compresses the space agencies trade in. IR35 already demonstrated the pattern: HMRC's own figures credit the off-payroll reform with an extra £4.2bn between 2019 and 2023, and roughly 45,000 fewer limited companies were formed than the trend predicted. Every one of those is a contractor who either went permanent or went via an umbrella, and in both cases the agency's role and margin changed.

Three strategic shifts are worth planning for now, before any consultation lands.

First, risk keeps moving up the supply chain. The clear direction of Labour policy is to push liability towards the top. The government has already committed to umbrella company regulation from April 2026, with liability for non-compliance passing to the end hirer where there is no agency in the chain. Read that carefully: agencies are being positioned as the compliance backstop. A single worker status regime would almost certainly extend that logic, making agencies the party that has to get classification right or wear the cost.

Second, demand for genuine flexibility does not disappear, it relocates. If limited company contracting gets harder, clients still need surge capacity and specialist skills. That demand flows into statement of work and outcome-based models, into umbrella employment, and into agency-managed solutions. The agencies that win are the ones already building outcome-based and compliance-heavy propositions rather than defending the day-rate PSC model to the last.

Third, cash flow pressure intensifies as more workers sit on payroll. The more the market tilts from self-employed contractors towards employed or umbrella models, the more agencies carry the timing gap between paying workers weekly and getting paid by clients on 30, 60 or 90 day terms. That funding gap is precisely the problem Raise exists to solve, and it gets larger, not smaller, in the world Burnham is likely to move towards.

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Which way this actually plays out

Let me be direct about the forecast rather than hedge.

The most likely outcome is not bold reform. It is continued drift, punctuated by a consultation that finally appears, generates a lot of noise, and moves slowly. That has been the pattern for a decade and Burnham has a defence budget, immigration, taxation and a US relationship to manage before he gets near employment status. He is also keeping his cards close, which is what politicians do when they have not decided.

But when the government does move, the direction is reasonably predictable. Labour's centre of gravity, and Burnham's in particular, favours extending protections and pulling more people into an employed-style status. That is good news for exploited gig workers and more mixed for the skilled independent workforce and the agencies that supply them. The genuinely self-employed carve-out will be the battleground, and how tightly it is drawn will decide whether flexible contracting thrives or contracts.

For agencies the sensible posture is not to wait and see. It is to assume liability will keep shifting your way, to build propositions that work in an outcome-based and compliance-led market, and to make sure your funding can absorb more workers sitting on payroll. Commitment to a consultation is no substitute for legislation, and hoping for repeal or a contractor-friendly settlement is not a strategy. Planning for a tighter, more employed labour market is.

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*Raise provides invoice finance built for recruitment agencies, bridging the gap between paying contractors weekly and being paid by clients on extended terms. If a shifting employment status landscape is changing how your workforce is engaged, that funding gap is exactly what we help you manage.*

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