Operators currently face their own real time nightmare in the form of a modern day version of the Greek mythological tale of Scylla and Charybdis (with sailors facing a narrow strait through which they must pass between a monster on one side and a whirlpool on the other); namely an operator’s licensing regime that treats the correct employment of staff – especially HGV and PSV drivers – as a repute (or fitness) issue going to the heart of an operator’s entitlement to hold an operator’s licence, and a labour government determined to legislate in a way that makes workers more expensive to employ as employees, while at the same time extending the rights of employees so that from day one of their employment an employer is ‘on the clock’ with former employer protections regarding recent employees stripped away.

To make matters worse, HGV and PSV operations do not lend themselves to a ‘working from home’ model as easily as many other business sectors.  Until fleets of driverless commercial vehicles become a reality drivers actually have to drive and you cannot do without them, and those supervising them often need to be physically present in the workplace in order to be effective.  Ancillary services are in the same boat – you cannot ‘phone in’ a regular safety inspection and rolling road brake test.

While one can well understand the desire of Traffic Commissioners to ensure that all operators are on a level playing field – fair competition as well as road safety being the fundamental objectives of the road transport regulatory regime – and one can see why the labour government wishes to extend the legal protections afforded to employees, the result is that employers who operate HGVs and PSVs face very serious challenges to the commercial viability of their businesses wherever they look.

Why should operators be ‘employing’ their drivers?

In November 2023 the Senior Traffic Commissioner (‘STC’) gave his decision following a Public Inquiry into Enero Logistics Ltd.  One of the issues in the case concerned the employment status of the operator’s drivers.  The Inquiry in November 2023 followed a previous Inquiry held in June 2022 when the operator gave an undertaking that all its permanent drivers would be made employees and subject to PAYE and National Insurance contributions.  In a lengthy decision the STC referred to ‘Statutory Document No. 5 Legal Entities’ which in its latest edition that can be accessed here contains the following warning:

The First-Tier Tribunal (Tax) has considered the employment status of drivers.  Her [sic] Majesty’s Revenue & Customs (‘HMRC’) raised concerns that haulage operators were wrongly treating workers as self-employed or hiring workers through their own companies in ways that did not comply with tax laws.  It is now well understood that it will be rare for someone to be genuinely self-employed unless they are an owner-driver. HMRC is aware that some companies wrongly believe that anti-avoidance legislation does not apply and that HMRC cannot pursue workers, agents and their companies.

 HMRC has issued detailed guidance on employment status and has published a tool to help determine a worker’s employment status for tax purposes. Transport providers cannot claim a commercial advantage by claiming that labour-only drivers are not employees, just because they are engaged on a job-by-job basis with no guarantee of future work. The contract for each engagement may well amount to a contract of employment and that the regularity of work done may indicate that there is a continuous contract.

The HMRC’s tool to help determine a worker’s employment status can be accessed here.

In public inquiries traffic commissioners frequently investigate the legal arrangements that an operator has in place with its drivers: are they employed PAYE with correctly drafted contracts of employment and a robust disciplinary and dismissal procedures (mindful that so-called ‘infringements’ are offences which are frequently permitted, and sometimes caused by the operator)?  Or are they ‘self-employed’ or supplied by a third party as agency workers, in which case has the law been correctly applied, or do the arrangements result in failures to pay HMRC the tax that is due?

Issues of supervision and control often go hand in hand with an operator’s arrangements to employ (or use) HGV and PSV drivers; so much so that any operator that is not employing all its drivers on a PAYE basis would be well advised to review the current arrangements in order to make sure that everything as it should be.

What is the government doing and planning to do?

In October 2024 the government published its ‘Employment Rights Bill, Economic Analysis’ document and the executive summary which contains the following text:

The government’s Plan to Make Work Pay is a core part of the mission to grow the economy, raise living standards across the country and create opportunities for all. It will tackle the low pay, poor working conditions and poor job security that has been holding our economy back.

The plan will help more people to stay in work, improve job security and boost living standards. Once implemented, the plan will represent the biggest upgrade of workers’ rights in a generation.

For each policy contained within the Employment Rights Bill we have assessed the quantified and non-quantifiable impacts, as well as considering the top-down impact of this comprehensive package. The headline findings of this analysis are that:

• There are clear, evidence-based benefits of government action through the Bill. Not acting would enable poor working conditions, insecure work, inequalities and broken industrial relations to persist.

• The Bill will strengthen working conditions for the lowest-paid and most vulnerable in the labour market, increasing fairness and equality across Britain. It will have significant positive impacts on workers who are trapped in insecure work, face discrimination, or suffer from unscrupulous employer behaviour like ‘fire and refire’ practices. Many policy changes in the Bill will target the issues identified by the independent Taylor Review of Modern Working Practices.

• Workers in Adult Social Care, those covered by collective bargaining agreements, those grieving a loss of a loved family member, and those struggling to make work fit in around other commitments will also be notable beneficiaries.

• There will be further benefits for those in work from better job satisfaction, as well as improved wellbeing and health, which could be [sic] amount to billions of pounds a year. This will benefit their employers too as 17.1 million working days were lost due to stress, depression or anxiety in 2022/23, equivalent to over £5 billion of lost output.

• Businesses will also benefit from tackling the undercutting that good employers currently face when trying to do the right thing, as well as benefitting from a more productive workforce. We expect these benefits to be significant although they are difficult to quantify.

• Delivering those benefits will place a direct cost on employers. These costs are expected to represent no more than a modest increase (less than 4%) on total employment costs, most of which willrepresent a transfer from businesses to their workers. At this stage we believe the direct cost tobusiness would be in the low billions of pounds per year. For businesses who rely on flexible contractsor low-paid employment these changes could be more disruptive, at least in the short run, but we deem risks to hiring intentions and employment to be relatively low.

• Costs will be proportionately higher for small and micro businesses due to the fixed costs of admin and compliance burdens, but most measures need to apply in the same way to all businesses as we cannot create a “two-tier” workforce (i.e. where some workers get access to rights and others do not). Not onlywould this be unfair on those workers that lose out, but it would provide a disincentive for those small businesses to grow.

It remains to be seen how operators interpret their ‘lived experience’ of the increases in tax and extended employee protections but the road transport industry is made up in very large part of small and micro businesses since the government defines a company as ‘small’ if it has any 2 of the following characteristics:

• A turnover of £15 million or less;
• £7.5 million or less on its balance sheet; or
• 50 employees or less.

A company is defined as a ‘micro entity’ if it has any 2 of the following:

• A turnover of £1 million or less;
• £500,000 or less on its balance sheet; or
• 10 employees or less

Interestingly the Economic Analysis document includes a ‘heatmap’ (on page 23 of the document) which shows the anticipated sectoral impact of its policies:

On the government’s own analysis, the only issues which are ‘unlikely’ to impact the ‘transportation and storage’ sector are:

• Improving access to statutory sick pay;
• Day 1 unfair dismissal rights;
• Fair pay agreements process for adult social care; and
• Strengthening collective redundancy rights.

In summary the list of changes and proposed changes includes the following:

1. Increases to the national minimum wage and national living wage will exceed 5% across the piece with increases for apprentices and employees aged 16-20 increasing by over 15%.

2. Employer’s National Insurance Contributions. The threshold for employers to begin to pay National Insurance on their employee earnings decreased from £9,100.00 per annum to £5,000.00 per annum, whilst the rate of Employer’s National Insurance Contributions has been raised to 15% of each employee’s gross annual salary.

3. A Day One right against unfair dismissal. Currently employees must complete two years of service with their employer before they are eligible to bring a claim against their employer for an unfair dismissal claim.  The new legislation gives employees this right from day one of their employment.  The government has said that this right will not be implemented until Autumn of 2026 to “allow time for detailed rules to be established” and for employers to “prepare”.

4. Unfair Dismissal Compensation. The limit for a week’s pay used in calculating unfair dismissal compensation is increased to £719.00.

5. Redundancy Pay. The limit for a week’s pay used in calculating redundancy pay was also increased to £719.00.

6. Statutory Sick Pay rate increase in combination with the removal of the of 3-day period before SSP becomes payable, with sick pay now due from the first day the employee rings in sick. This right also extends to any employer’s enhanced sick pay schemes which would also now have to pay out the stated level of pay, such as full pay, from day one of the sick leave being registered.

7. Neonatal care leave and pay with a new right allowing parents to take up to 12 weeks of paid leave if their child received neonatal care.

8. Rates for maternity pay, paternity pay, adoption pay, shared parental pay and parental bereavement pay are all increased to £187.18 per week.

9. Changes to Trade Union Rights. All employers are now legally required to inform workers of their right to join a trade union from day one of their employment.   From 2026, the Employment Rights Bill (ERB) will also introduce a new right for trade unions to access workplaces, both physically and digitally as well as simplifying the process for trade unions to gain recognition as a union, which is expected to reduce the membership thresholds unions need and “address anti-recognition” tactics, presumably by employers, both of which will make it easier for unions to build up the level of support needed in a workforce to meet the thresholds to trigger a ‘statutory recognition’ request.

10. Harassment - there will be a new duty for employers to take ‘reasonable steps’ to prevent workplace harassment, extending the guidance on preventing sexual harassment at work to include a liability for third party harassment on employers in respect of all types of harassment.

11. Restrictions on “Fire and Rehire” - the practice commonly known as ‘fire and rehire’ sometimes used to handle variations in employees’ contracts will be deemed by the law as giving employees the automatic right to bring an unfair dismissal claim. The new law will aim to ensure that employers will not be able to vary an employment contract without the employee’s consent.  It will also not allow employers to ‘re-engage’ an employee or hire someone else under a new contract if the same duties under the new contract are substantially similar to those under the old one.

12. Zero Hour Contracts to be banned. The new legislation will crystallise the concept of ‘guaranteed hours’ in employment law, thereby ‘banning’ the concept of Zero Hour contracts that have provided much needed flexibility for employers, especially those who face seasonal changes in demand for their services.  Employers will be required to offer guaranteed hours to zero-hours workers and workers on ‘low’ guaranteed hours but who often work more hours than specified.  The new law also proposes that workers should be compensated for any shifts their employers schedule them to work that are cancelled or that end earlier than planned.

13. Changes to Flexible Working. The new bill will take a further step on the right for flexible working requiring employers to justify their refusal for flexible working and to specifically state the reason(s) for the refusal, which the bill states must be ‘reasonable’.

Faced with commercial pressures, compliance obligations and the endless day to day operational challenges that accompany any HGV or PSV operation, many operators will treat the changes to the employment framework as a set of bridges to be crossed if and as and when they come to them.  If there is an opportunity embedded in the changes in the rules, it is that they may act as a catalyst for employers to review their current arrangements and the way in which they record the employment procedures that they have in place, so as to take steps now to ensure that they at least have an understanding of what it is that they are required to do.

If your business or transport operation would like some further help on the subject of employment law then call us on 01279 818280 or click here to send us an email.  Our solicitors have years of experience in this area and are happy to help.

© Richard Pelly, July 2025  Article first appeared in Essential Fleet Management Magazine