Modernise Employment Rights for the Gig Economy
Liberal Democrat · what the evidence says
An independent, source-checked look at Liberal Democrat’s policy “Modernise Employment Rights for the Gig Economy” — what it would actually do across the things that affect your life. Every claim below quotes the source behind it. How this works.
Prosperity & living standards — Mixed picture
moderate · moderate confidence
The policy would lift living standards and economic security for roughly 1–1.5 million gig and zero-hours workers, but higher labour costs and a more complex status framework risk discouraging business investment and firm formation, especially for small platform-based businesses. Whether aggregate prosperity gains or loses depends on how firms respond to the cost increase.
The evidence
- Approximately 1.03 million people in the UK were on zero-hour contracts as their main job in mid-2024. — gov.uk (media) — “Approximately 1.03 million people in the UK were on zero-hour contracts as their main job between April and June 2024, according to ONS Labour Force Survey data”
- Around 550,000 workers were in the gig economy in 2019–20. — economy2030.resolutionfoundation.org (institutional) — “They estimated that around 550,000 workers were in the gig economy in 2019-20, with less than half self-identifying as self-employed”
- ZHC workers are associated with lower pay, reduced career progression and financial insecurity. — commonslibrary.parliament.uk (government) — “ZHCs are often associated with lower pay, reduced career progression, and financial insecurity due to a lack of guaranteed hours”
- Employers pay 13.8% NI on employees' wages but nothing if the same work is performed by a self-employed person, creating a large tax differential. — resolutionfoundation.org (institutional) — “Employers pay 13.8% National Insurance Contributions on employees' wages, but nothing if the same work is performed by someone self-employed”
- The tax gap between employee and self-employed work is around 9% of labour value at median earnings, meaning a typical employee pays 55% more tax than an equivalent self-employed worker. — resolutionfoundation.org (institutional) — “the 'tax gap' between employee and self-employed work is now around 9% of the labour value for a median earner, meaning a typical employee pays 55% more tax than an equivalent self-employed worker”
- Gig economy companies often classify workers as self-employed to avoid employer obligations. — commonslibrary.parliament.uk (government) — “Gig economy companies often classify individuals as self-employed to avoid employer obligations.”
- Granting gig workers clarified statutory rights including minimum wage, holiday pay and sick pay could raise their living standards directly. — commonslibrary.parliament.uk (government) — “This new status aims to clarify employment status for many gig workers currently operating in a grey area, granting them statutory rights like the National Minimum Wage, holiday pay, and sick pay, which they may currentl…”
- Employers could respond to higher minimum wage costs by increasing reliance on flexible contracts rather than absorbing the cost. — economy2030.resolutionfoundation.org (institutional) — “This suggests that employers may respond to higher minimum wage costs by increasing reliance on flexible contracts”
- The manifesto's approach may involve further consultation and delays, meaning real-world effects could be deferred. — osborneclarke.com (media) — “some analysts note that the manifesto's approach to gig employment reforms may involve further consultation and delays”
Biggest unknown: Whether firms absorb higher labour costs through productivity gains and reduced misclassification, or instead cut hours and reduce hiring — particularly for zero-hours workers facing a 20% wage premium.
Our reading: For O13 — prosperity and living standards — the key questions are: does this lift aggregate real living standards and economic opportunity, or does it reduce business dynamism and investment? On the upside: roughly 1 million ZHC workers and 550,000 gig workers are currently in a position of financial insecurity and depressed earnings, partly because employers exploit classification ambiguity to avoid statutory obligations. Granting minimum earnings, sick pay and holiday entitlement to 'dependent contractors' would directly raise their effective income floor, improving real living standards at the bottom end. The burden-of-proof shift and right-to-request fixed hours are analytically supported (Taylor Review, Resolution Foundation) and address a documented market failure — the large employer-NI tax wedge that distorts labour market classification. Tackling bogus self-employment would reduce a deadweight distortion and improve labour market efficiency in principle. On the downside: the 20% wage premium for ZHC workers at normal-demand times is a material cost increase for businesses relying on flexible labour. Evidence shows employers may respond to higher wage costs by increasing reliance on flexible contracts rather than absorbing costs — the opposite of the policy's aim. The net employment and hours effect is uncertain. Adding a new 'dependent contractor' tier alongside the existing 'worker' status risks added complexity without clear gain, as analysts note it may be 'reinventing the wheel'. Tax equalisation, while correcting a distortion, could reduce incentives for genuine self-employment and small-firm formation, with uncertain aggregate effects on business dynamism. The verdict is mixed rather than 'improves': the living standards gains for directly affected workers are real and backed by evidence, but so are the risks to business investment and employment levels at the margin. The 20% ZHC wage premium in particular is a genuine double-edged instrument — it could reduce exploitation or reduce hours. Neither side dominates the evidence.
Inequality & fair shares — Helps
moderate · moderate confidence
This policy extends pay floors, sick pay, and holiday rights to lower-paid gig and zero-hours workers who currently lack them, narrowing the gap between insecure workers at the bottom and better-protected employees. The main caveat is that some measures are framed as reviews rather than firm commitments, and employer responses could offset gains.
The evidence
- A 20% higher minimum wage would apply to zero-hours contract workers at times of normal demand. — libdems.org.uk (manifesto) — “setting a 20% higher minimum wage for people on zero-hour contracts at times of normal demand”
- The policy would review NI and tax treatment of employees, dependent contractors and freelancers to ensure fair and comparable treatment. — libdems.org.uk (manifesto) — “reviewing the tax and National Insurance status of employees, dependent contractors and freelancers to ensure fair and comparable treatment”
- The burden of proof in employment tribunals on employment status would shift from the individual to the employer. — libdems.org.uk (manifesto) — “shifting the burden of proof in employment tribunals regarding employment status from individual to employer”
- Gig economy companies commonly classify individuals as self-employed to avoid employer obligations, leaving workers without basic protections. — commonslibrary.parliament.uk (government) — “Gig economy companies often classify individuals as self-employed to avoid employer obligations.”
- Zero-hours contract workers disproportionately include younger, female and part-time workers — groups more likely to be at the lower end of the income distribution. — commonslibrary.parliament.uk (government) — “They disproportionately affect younger, female, and part-time workers, and those in sectors like accommodation and food”
- Approximately 1.03 million people were on zero-hours contracts as their main job in mid-2024. — gov.uk (media) — “Approximately 1.03 million people in the UK were on zero-hour contracts as their main job between April and June 2024”
- The tax gap between employee and self-employed work is around 9% of labour value for a median earner, meaning employees pay 55% more tax than equivalent self-employed workers — a differential that benefits those using self-employment classification. — resolutionfoundation.org (institutional) — “the 'tax gap' between employee and self-employed work is now around 9% of the labour value for a median earner, meaning a typical employee pays 55% more tax than an equivalent self-employed worker”
- ZHC workers are associated with lower pay, reduced career progression and financial insecurity. — commonslibrary.parliament.uk (government) — “ZHCs are often associated with lower pay, reduced career progression, and financial insecurity due to a lack of guaranteed hours”
- The new dependent contractor status is projected to clarify and extend statutory rights — including minimum wage, holiday pay and sick pay — to gig workers currently denied them. — commonslibrary.parliament.uk (government) — “This new status aims to clarify employment status for many gig workers currently operating in a grey area, granting them statutory rights like the National Minimum Wage, holiday pay, and sick pay, which they may currentl…”
- A right to request fixed hours after 12 months could give ZHC and agency workers greater income stability. — bdbf.co.uk (media) — “This would offer ZHC and agency workers more stability and certainty in their working hours and income, potentially aiding financial planning, such as applying for mortgages”
- Some analysts warn that raising minimum wage costs for ZHC workers could lead employers to increase reliance on other flexible contract forms, potentially offsetting gains. — economy2030.resolutionfoundation.org (institutional) — “This suggests that employers may respond to higher minimum wage costs by increasing reliance on flexible contracts”
Biggest unknown: Whether employers respond to the 20% ZHC wage premium and new contractor rights by reducing hours, shifting to other contract forms, or offshoring work — which could limit distributional gains for the lowest-paid.
Our reading: O14 is about whether the gap between the richest and the rest narrows or widens. The distributional logic here is straightforward: the policy's main instruments — a new dependent contractor status with pay floors, sick pay and holiday rights; a 20% ZHC wage premium; burden-of-proof shift in tribunals — all flow toward workers who are currently at the bottom of the labour market. ZHC workers are disproportionately young, female and part-time (lower-income groups); gig workers are currently denied basic protections that employees enjoy. Extending floor rights to these groups directly narrows the income and protection gap relative to better-off, more securely employed workers. The tax and NI review, if it equalises treatment between employed and self-employed, would reduce the differential that currently subsidises the use of self-employment classification — a form of rent that tends to benefit employers and higher-earning genuinely self-employed people more than low-paid gig workers. The burden-of-proof shift removes a structural barrier that currently lets employers exploit status ambiguity at the expense of lower-paid workers. The main risk to this verdict is employer response: if the 20% ZHC wage premium leads employers to reduce hours or reclassify workers, the lowest-paid could lose ground. The tax review and pension review are stated as 'reviewing' rather than firm commitments, limiting their guaranteed distributional effect. On balance, the evidence points clearly toward a narrowing of the income and protection gap for roughly 1–1.5 million low-paid workers at the bottom of the labour market — a moderate improvement on O14. Magnitude is moderate rather than major because the gig/ZHC population, while sizeable, is a minority of the workforce, and some measures are contingent on reviews rather than direct legislative changes.
Good work & fair pay — Helps
moderate · moderate confidence
This policy would give gig and zero-hours workers new legal protections — minimum pay, sick pay, holiday pay, and more stable contracts — that they currently lack. The main caveat is that implementation complexity and potential employer responses (such as reducing hours offered) could limit how much workers actually gain.
The evidence
- The policy sets a 20% higher minimum wage for zero-hours contract workers at times of normal demand. — libdems.org.uk (manifesto) — “setting a 20% higher minimum wage for people on zero-hour contracts at times of normal demand”
- The burden of proof in employment tribunals on employment status shifts from worker to employer. — libdems.org.uk (manifesto) — “shifting the burden of proof in employment tribunals regarding employment status from individual to employer”
- Around 1.03 million people in the UK were on zero-hours contracts as their main job between April and June 2024. — gov.uk (media) — “Approximately 1.03 million people in the UK were on zero-hour contracts as their main job between April and June 2024, according to ONS Labour Force Survey data”
- Zero-hours contracts are associated with lower pay, reduced career progression, and financial insecurity. — commonslibrary.parliament.uk (government) — “ZHCs are often associated with lower pay, reduced career progression, and financial insecurity due to a lack of guaranteed hours”
- Zero-hours contracts disproportionately affect younger, female, and part-time workers. — commonslibrary.parliament.uk (government) — “They disproportionately affect younger, female, and part-time workers, and those in sectors like accommodation and food”
- Gig economy companies often classify individuals as self-employed to avoid employer obligations. — commonslibrary.parliament.uk (government) — “Gig economy companies often classify individuals as self-employed to avoid employer obligations.”
- Currently individuals must bear the burden of proving their employment status in tribunals, which is difficult given complex legal tests. — commonslibrary.parliament.uk (government) — “Currently, individuals often bear the burden of proving their employment status in tribunals, which is challenging given the complexity of legal tests and the incentive for platform companies to classify workers as self-…”
- The dependent contractor status would clarify rights for gig workers currently in a grey area, granting statutory minimum wage, holiday pay, and sick pay. — commonslibrary.parliament.uk (government) — “This new status aims to clarify employment status for many gig workers currently operating in a grey area, granting them statutory rights like the National Minimum Wage, holiday pay, and sick pay, which they may currentl…”
- Some analysts question whether the new dependent contractor status is meaningfully different from the existing worker status. — tollers.co.uk (media) — “Some analysts have also questioned the fundamental difference between this proposed status and the existing 'worker' status, asking if it's "reinventing the wheel"”
- Employers may respond to higher minimum wage costs by increasing reliance on flexible contracts. — economy2030.resolutionfoundation.org (institutional) — “This suggests that employers may respond to higher minimum wage costs by increasing reliance on flexible contracts”
Biggest unknown: Whether employers respond to higher costs by cutting hours or work offered, and whether the new 'dependent contractor' status is meaningfully distinct from the existing 'worker' category in practice.
Our reading: The policy targets a well-documented gap in UK employment protections. Over a million workers are on zero-hours contracts and many more in gig arrangements lack basic rights like sick pay and holiday pay — rights that employees take for granted. The new dependent contractor status, combined with a 20% wage premium for zero-hours workers and a right to request fixed hours, directly addresses the pay insecurity and instability that characterise these arrangements. Shifting the burden of proof in tribunals is a practically significant change: it removes a major structural barrier that currently deters workers from challenging misclassification. These measures are not untested ideas — the Taylor Review and Resolution Foundation both recommended nearly identical interventions, lending them credibility. The direction of effect on O4 is clearly positive: more workers would gain access to minimum wage guarantees, sick pay, and holiday entitlement, which directly improves pay levels, security, and conditions — the core indicators for this fundamental. The main risks are: (1) employers reducing hours or work offered in response to the 20% ZHC premium, partially offsetting gains; (2) the dependent contractor category may prove difficult to distinguish from the existing 'worker' status, creating new legal uncertainty rather than resolving it; (3) implementation complexity and potential consultation delays could defer real-world impact. On balance, the evidence from independent analysts supports the policy's direction. The risks are real but they are implementation risks rather than fundamental design flaws. The magnitude is moderate — significant for affected workers but the policy doesn't address broader job quality issues for the wider workforce, and key details (e.g. exact scope of pension review, tax treatment) are left to future review rather than decided upfront.
Security in later life — Genuinely contested
n/a · low confidence
The policy promises only a 'review' of pension rules for gig workers, which is an aspiration rather than a concrete reform. Without a committed change to auto-enrolment or contribution rules, it is impossible to say whether retirement security for gig workers would materially improve.
The evidence
- The policy commits only to 'reviewing rules concerning pensions for gig economy workers', not to a specific change. — libdems.org.uk (manifesto) — “reviewing rules concerning pensions for gig economy workers”
- Self-employed individuals, including many gig workers, have historically had less access to pension provision compared to employees. — publications.parliament.uk (government) — “Historically, self-employed individuals (a category that includes many gig workers) have had less access to welfare support, including pension provision, compared to employees”
- A significant proportion of self-employed workers may lack adequate pension savings. — publications.parliament.uk (government) — “a significant proportion may lack adequate pension savings”
- Further consultation and delays may follow gig economy reforms, reducing the chance of near-term delivery. — osborneclarke.com (media) — “some analysts note that the manifesto's approach to gig employment reforms may involve further consultation and delays”
Biggest unknown: Whether the pension 'review' will translate into a concrete, funded mechanism extending auto-enrolment or comparable pension rights to dependent contractors — without that, no material effect on later-life security follows.
Our reading: The only O8-relevant element of this policy is the commitment to 'reviewing rules concerning pensions for gig economy workers.' This is a soft-verb, no-deliverable promise: there is no committed instrument, budget, statutory duty, or quantified target attached to it. The baseline evidence confirms that gig workers and the self-employed face a real retirement security gap — less access to pension provision and potentially inadequate savings. But a review does not close that gap. The policy also creates a new 'dependent contractor' status with sick pay and holiday pay, which could in principle be paired with pension rights, but the text does not commit to this. Analysts flag that gig economy reforms from this policy approach may face further consultation and delays. Because the deciding parameter — whether a concrete pension mechanism is ultimately adopted — is entirely unresolved by the policy text, and credible evidence shows the problem is real but the solution is unpromised, the honest verdict is too-uncertain. 'Improves' cannot be awarded on aspiration alone.