The gig economy has transformed how millions of people work in the UK, but significant changes are coming that will reshape this landscape. With the Employment Rights Bill reaching Royal Assent in Deccember 2025 and new regulations from the Autumn 2025 Budget, now’s the time to understand what these changes mean for workers and businesses.
What is the gig economy?
The gig economy is a labour market where people work temporary, flexible jobs rather than permanent positions. Instead of having one employer and a regular salary, gig workers take on short-term contracts or freelance work, often through digital platforms or apps.
Think of Deliveroo riders, Uber drivers, freelance graphic designers, or TaskRabbit handypeople. These workers pick up individual gigs or jobs, complete them, get paid, and move on to the next one.
Although there is disagreement over the number of people involved in the gig economy, with ONS research in 2021 estimating around 4-5 million, the CIPD in 2023 came up with a far lower figure in their analysis.
Whatever the true figure, however, it is a growing number of people in the UK who work in the gig economy in some capacity, whether as their main income source or a side hustle. Meanwhile, approximately 1 million people are on zero-hours contracts, representing about 3% of the UK workforce.
How does it work?
Most gig economy work happens through digital platforms. A customer requests a service through an app, the platform connects them with an available worker, the job gets done, and payment is processed automatically. The platform usually takes a commission from each transaction.
Common gig economy sectors include food delivery, transport, freelance services, retail and logistics, and domestic services.
What’s changing – the Employment Rights Bill
The Employment Rights Bill represents the most significant overhaul of employment law in over a decade. It introduces major reforms affecting gig workers and zero-hours contracts, with implementation phased between 2026 and 2027.
Day-one employment rights
From 2027, employees will gain protection from unfair dismissal from their first day of employment. The government has amended the original proposal, reducing the qualifying period from two years to six months rather than providing immediate day-one protection. This still represents a significant change that will
require employers to undertake more robust dismissal processes much earlier in the employment relationship.
Statutory Sick Pay from day one
From April 2026, all eligible workers will be entitled to Statutory Sick Pay from day one of employment. The government is removing the minimum earnings threshold, meaning more low-paid and gig economy workers will qualify for SSP when they’re too ill to work.
Ending one-sided flexibility on zero-hours contracts
The Bill tackles what the government calls “one-sided flexibility” by requiring employers to offer guaranteed hours contracts to workers who regularly work more than their contracted hours.
Here’s how it will work:
- After working for a reference period (12 weeks), workers on zero-hours contracts or with low guaranteed hours will be entitled to an offer of guaranteed hours
- The offer must reflect the hours they’ve actually worked during that period
- Workers can accept or reject the offer, and employers must keep making offers at subsequent review periods
- Employers must provide reasonable notice of shifts and compensate workers for shifts cancelled at short notice
- These protections will extend to agency workers to prevent employers circumventing the rules
Implementation is scheduled for 2027, with consultation on the details planned for autumn 2025.
Banning exploitative fire and rehire
The Bill introduces automatic unfair dismissal protection when employers dismiss employees for refusing to accept contract changes. This only applies to “restricted variations” including pay reductions, changes to hours, shifts or time off, and pension entitlements.
Employers will only be able to use fire and rehire practices in cases of extreme financial hardship and must follow a strict consultation process. The ban also extends to “fire and replace” practices, preventing employers from replacing employees with self-employed contractors or agency workers to avoid employment protections.
These measures take effect from October 2026.
Potential reform to worker status
The government has committed to consulting on “single worker status” reform by late 2025/early 2026. This could collapse the current three-tier classification system (employee/worker/self-employed) into two categories: worker (with comprehensive employment rights) and genuinely self-employed (providing services to clients).
This would be a fundamental shift for the gig economy, potentially requiring platforms to reclassify many workers currently labelled as self-employed.
Right to Work checks: a major compliance change
From 2 December 2025, the Border Security, Asylum and Immigration Act received Royal Assent, introducing a significant new obligation for businesses using gig economy workers and those on zero-hours contracts.
What changed?
The definition of employment for Right to Work purposes has been extended to include:
- Workers engaged under a worker’s contract
- Zero-hours contract workers
- Sub-contractors
- Individuals engaged through online matching services or platforms
This affects an estimated 500,000 workers who were previously exempt from verification requirements.
The compliance burden
Organisations engaging gig workers must now:
- Carry out Right to Work checks before work commences
- Establish a statutory excuse against liability for penalties
- Implement verification systems for both existing and new workers
Failure to comply carries severe penalties:
- Civil penalties up to £60,000 per illegal worker for repeat offenders
- Potential imprisonment up to five years for knowing violations
- Risk of sponsor licence revocation for businesses holding one
Affected sectors
Industries most impacted include:
- Food delivery services (Deliveroo, Uber Eats)
- Courier and logistics services
- Private hire transport (Uber, Bolt)
- Construction
- Hospitality
- Beauty and personal care services
The government published a consultation (closed 10 December 2025) on how to implement these changes, with updated guidance and a revised Statutory Code of Practice expected. For short-term engagements, businesses may need to consider Digital Identity Service Providers to facilitate faster, remote verification.
Autumn Budget 2025 – tax changes affecting gig workers
The Chancellor’s Autumn Budget, delivered on 26 November 2025, included measures that will affect gig workers and the self-employed.
Personal tax threshold freeze extended
The government extended the freeze on personal tax thresholds (income tax and National Insurance contributions) for three further years, from April 2028 to 2031. This means thresholds will have been frozen for nearly a decade.
As wages rise through inflation, more gig workers will be dragged into higher tax bands through “fiscal drag,” even though headline tax rates haven’t changed. This effectively amounts to a tax rise on working people, including those in the gig economy.
The Office for Budget Responsibility expects this to raise £23 billion in total by 2030/31.
Increased enforcement of the gig economy
The Budget highlighted increasing scrutiny of the gig economy, with a focus on employment status, Right to Work compliance, and potential Corporate Criminal Offence liability. Immigration enforcement activity has increased by 63% for illegal working arrests and 51% for workplace raids.
This signals a clear government intention to ensure gig economy businesses comply with both tax and employment obligations.
The pros and cons for gig workers
The advantages
Flexibility and freedom. You can choose when you work, how much you work, and often where you work. Perfect if you’re a student, have childcare responsibilities, or value control over your schedule.
Easy entry. Many gig economy jobs don’t require extensive qualifications. You can start earning relatively quickly if you need immediate income.
Variety and autonomy. You’re not stuck doing the same thing every day for the same employer. Many gig workers enjoy the independence.
Extra income. For some, gig work provides valuable supplementary income alongside a main job.
The disadvantages
Income instability. There’s no guaranteed wage or regular paycheck. Your earnings can fluctuate wildly depending on demand, weather, competition, and platform algorithm changes.
Current lack of employment rights. Most gig workers are still classified as self-employed contractors, which means they typically don’t currently get sick pay, holiday pay, minimum wage guarantees, pension contributions, protection from unfair dismissal, or maternity/paternity leave. This is what the Employment Rights Bill aims to address.
No benefits. You’re responsible for your own insurance, equipment, and expenses. That delivery bike? You bought it. The petrol for Uber? That’s on you.
Precarious work. Platforms can change rates, algorithms, or terms at any time. You might earn less with no warning or even be deactivated from the platform with limited recourse.
Social isolation. Without colleagues or workplace community, gig work can be lonely.
Hidden costs. Equipment wear and tear, insurance, fuel, and tax obligations can significantly reduce your actual take-home pay.
The impact on employers and platforms
The advantages
Cost savings. Not having to pay National Insurance contributions, pensions, sick pay, or holiday pay can reduce labour costs by 30-40%, though these savings will reduce as reforms take effect.
Flexibility and scalability. Scale up during busy periods and down during quiet times without keeping staff on the books year-round.
Access to talent. Tap into specialists for specific projects without permanent commitments.
The challenges ahead
Increased costs. The Employment Rights Bill will require platforms to provide benefits they’ve previously avoided, fundamentally changing their business models.
Complex compliance. Right to Work checks add administrative burden and risk. Implementing verification systems for potentially thousands of workers requires significant investment.
Legal uncertainty. Employment status remains contested. Recent tribunal rulings against major platforms demonstrate that courts will look beyond contractual labels to examine actual working relationships.
Quality and retention issues. Maintaining service quality and managing high turnover remain ongoing challenges.
Reputational risk. Public and media scrutiny of gig economy working conditions can damage brands.
Recent legal developments
The legal landscape continues to evolve through court cases. The landmark 2021 Supreme Court ruling that Uber drivers are workers entitled to minimum wage and holiday pay set an important precedent.
More recently, in January 2025, tribunals ruled that all 700 Addison Lee drivers are workers entitled to comprehensive backdated entitlements. Significantly, the judgment criticised executives for “falsifying evidence” and found that operational changes made since earlier rulings “paid lip service only” to worker
rights while maintaining control mechanisms.
These rulings demonstrate that tribunals will look beyond cosmetic contractual changes to examine whether genuine operational changes have occurred. Platforms using algorithmic control, setting prices, allocating work, and monitoring performance exercise control inconsistent with genuine self-employment.
What this means for your payroll
If you’re a business using gig workers or zero-hours contracts, you need to prepare for significant changes:
- Review worker classifications now. Don’t wait until 2027. Assess whether your current classifications would stand up to scrutiny under the new regime.
- Implement Right to Work checks immediately. The requirement is already law as of December 2025. Ensure you have systems to verify immigration status for all workers, including those on platforms.
- Budget for increased costs. Factor in potential National Insurance contributions, pension contributions, sick pay, and holiday pay for workers who may need reclassification.
- Update contracts and processes. Zero-hours arrangements will need modification to comply with guaranteed hours requirements once implemented.
- Improve record-keeping. Track actual hours worked to prepare for potential guaranteed hours offers and ensure you can demonstrate compliance.
- Monitor consultation outcomes. The government plans over 80 accompanying regulations and at least 26 specific consultations. The details matter.
The gig economy isn’t going away, but it’s going to look very different over the next few years. The Employment Rights Bill and related changes represent the biggest shift in employment law in a generation, aimed at protecting workers while trying to preserve some flexibility.
As a business, you need to get ahead of these changes.
- Review your worker classifications
- Implement Right to Work checks
- Start planning for increased employment costs.
The days of treating gig workers as genuinely self-employed contractors without any obligations are ending.
For workers, these changes should provide greater security and protection. From unfair dismissal rights to guaranteed hours contracts and Statutory Sick Pay from the start, the balance is shifting toward employment protections while maintaining some flexibility.
The key question remains whether we can preserve what makes gig work attractive while ensuring workers aren’t left vulnerable. The government believes these reforms strike that balance. Time will tell.
