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Government puts £168 million annual business cost on worker status reforms as private hire drivers enter employment rights debate
The Government has estimated that proposed changes to employment status rules could cost UK businesses approximately £167.8 million annually, according to an economic assessment published on Thursday 29 October.
The Department for Business, Innovation, Science and Trade published the assessment alongside its existing consultation on employment status reform and protections for self-employed workers.
The proposals could have implications for private hire operators and ride-hailing platforms, although the Government has not calculated a separate financial impact for the taxi and private hire industry.
Ministers are considering changes that would place less emphasis on whether individuals are contractually required to perform work personally when determining their employment status.
Under the proposed approach, contractual rights allowing workers to send substitutes would carry less weight where other characteristics of the relationship, including the level of control exercised by a business, indicate worker status.
The Government is also proposing a presumption of worker status in employment tribunals. This would shift the burden of proof towards businesses disputing claims that individuals qualify for statutory worker protections.
The proposals concern employment rights rather than the separate framework used to determine employment status for tax purposes.
The newly published assessment estimates that approximately 210,000 people across the UK could be affected by changes to the personal service test.
That figure represents around 5% of the self-employed population and is based on analysis of survey data collected in 2023.
The department estimates that the preferred reforms would impose an equivalent annual net direct cost on businesses of £167.8 million. The figure covers the economy as a whole rather than private hire operators specifically.
The assessment also identifies potential benefits for workers through access to statutory protections, including the National Minimum Wage, paid holidays and employer pension contributions.
Officials estimate that businesses using worker-based arrangements can face costs up to 30% higher than those using self-employed contractor models, depending on the protections provided.
The Government’s analysis identifies contractual substitution clauses as a particular area of concern.
It cites Office for National Statistics research indicating that approximately 3.4% of UK businesses used substitution clauses between November 2025 and August 2026.
Among those businesses, 60% reported that the clauses were never exercised in practice.
The assessment also examines working conditions in the gig economy, explicitly referencing research involving private hire drivers and delivery couriers.
It cites a 2022 survey by the Independent Workers’ Union of Great Britain in which 90% of respondents, predominantly couriers and private hire drivers, reported experiences consistent with in-work poverty.
That finding relates to the survey respondents and should not be interpreted as establishing the proportion of all UK private hire drivers experiencing poverty.
The department acknowledges that employment status reforms could increase labour costs for affected businesses, potentially influencing consumer prices, worker earnings and recruitment decisions.
However, it has not established how individual ride-hailing platforms or private hire operators would respond, or how many drivers in the sector would gain additional protections.
The assessment also considers a narrower alternative specifically targeting platform workers, but identifies the broader reform of the personal service test as its preferred approach.
The Government has not announced a final decision or implementation date.
Its consultation remains open until 8 January 2027.
