Spending Review 2025 just talked tough on workforce casualisation. But beneath the surface bubbles false self-employment masquerading as employment – and Labour isn’t looking.
A quiet shift is happening in the UK employment market, and it should be raising alarm bells for anyone who cares about job security, employment rights, or fair treatment of workers, writes chartered accountant Anthony Mellor, founder of Mellor & Co.
The just-dropped Spending Review 2025 was in ‘working people’ overdrive
With no fewer than NINE mentions of “working people”, last Wednesday’s Spending Review speech 2025 strongly indicates Labour should be concerned about it too.
And that’s even if Labour should be concerned for another reason – that the shift I’m about to expose, to so-called ‘fixed-term, no benefits’ working, appears to expose their policy contradictions, in light of them continually championing “workers”.
These are the very individuals who the chancellor claimed the government has not increased taxes on. That seems at odds with the OBR’s report into the now in-force employer NICs hike stating 60% of the cost increase since April 6th can be passed on to employees (at least in the short term).
What employment shift am I talking about?
Once upon a time, if you applied for a job, you were applying to become an employee, with all the associated rights:
- sick pay this
- holiday pay
- pension contributions
- parental leave, and often
- potential career development/training/support
But increasingly, that’s no longer the case.
The rise of ‘contractor employees’
Individuals today are applying for jobs that look and feel like employment, only to discover that what they’re actually being offered is a fixed-term contract, often for 12 or 24 months, with no guarantee of renewal. It’s worse for graduates, because they first have their initial six- or 12-month probation period to get past.
This isn’t actually inherently the problem. Fixed-term contracts have always had their place in the workforce. But what’s different now is how these contracts are structured and enforced – employers are never slow to spot a risk-reduction opportunity.
What does a ‘fixed-term, no benefits’ job look like in 2025?
These ‘fixed-term, no benefits’ roles typically have three features:
- Mimic the structure of freelance or contractor engagements, requiring the individual to operate under contractor-style terms (although a typical employee may well not spot this).
- Place the worker ‘inside IR35’ as a result of (1), treating them for tax purposes as an employee.
- Paradoxically, due to (2), the end-hirer offers none of the benefits of actual employment.
Where is ‘fixed-term, no benefits’ hiring prevalent today?
This is not a theoretical concern.
As a tax and accounting adviser to contractors and other professionals, I know ‘fixed-term, no benefits’ employment to now be the lived experience of unsuspecting ‘workers’ in sectors ranging from tech and finance to clerical and public sector administration.
What’s relevant here is HMRC’s Employment Status Research. I think I know why a quarter came out with “unassigned status”, with a third of those having “undetermined status” and an even greater number being deemed “likely workers”.
It’s invariably the shift to ‘fixed-term, no benefits’ roles that is muddying waters and blurring lines like never before.
‘Inside IR35’, but outside the law’s intent?
Thanks to HMRC’s revised IR35 rules of April 6th 2017 and 2021, many contractors – and now even fixed-term workers – are being treated as if they’re employees for tax purposes.
As a result, they pay full PAYE and National Insurance Contributions (NICs).
In many cases, the end-hirer will mandate that they must work via an umbrella company, which deducts tax and NICs before passing on what’s left as “net pay”. This is the main adverse impact of the off-payroll working (OPW) regulations.
What are ‘fixed-term, no benefits’ workers entitled to?
Despite this quite taxing tax treatment, the individual:
- Is not entitled to sick pay
- Accrues no redundancy rights
- Receives no employer pension contributions
- Receives no parental leave
The individual will also have no access to workplace benefits like career development/training, and support with healthcare.
This is the worst of both worlds: taxed like an employee, with none of the rights of employment – as they get treated like a disposable contractor. Indeed, contractors are accustomed to this treatment, employees are most definitely not.
A legal grey zone with real human costs
The reality is that many of these roles amount to ‘false employment’, or perhaps more accurately, ‘false self-employment masquerading as employment’.
The roles are structured to shield the end-hirer from risk while transferring all the risk entirely to the worker.
And here’s the kicker. These increasingly common ‘fixed-term, no benefits’ roles fly in the face of the political rhetoric we’re hearing IN 2025-26, particularly from Labour.
The policy contradiction from the party of ‘working people’
The government and, in particular, the deputy PM Angela Rayner MP, are making bold, headline-grabbing commitments to strengthening worker protections, ending exploitative practices, and reversing what they describe as the casualisation of the workforce.
We heard just 48 hours ago from chancellor Rachel Reeves in Spending Review 2025 that “this government is doing more” by “banning exploitative zero hours contracts…strengthening statutory sick pay” and “ending the injustice of unscrupulous fire-and-rehire practices”.
It’s hard not to support all of that.
But the ‘employment model’ prevailing today, in opposite ends of the country and on public sector contracts overseen by government departments, isn’t being looked at, seemingly because the government is too busy congratulating itself.
What does ‘fixed-term, no benefits’ hiring mean, in practice?
In practice, we now have:
- Workers engaged long-term, often under supervision, direction or control, in roles indistinguishable from employment.
- Workers carrying out these fixed-term roles but denied employment protections, job security or career continuity.
Worse still for these individuals, these workers are paying more tax than ever, thanks to umbrella companies still ‘skimming’ to improve their margins and the OPW rules necessitating higher, automatic deductions. And the worker, at the same time, gets stripped of employment rights.
Are ‘fixed-term, no benefits’ opportunities really the future of ‘employment’ in the UK?
Where next?
Well, it’s no surprise to me that disillusionment is growing.
Responding to the Spending Review 2025, the Recruitment & Employment Confederation (REC) explained it was disappointed not to see more attention on the “workplace”.
APSCo reckons Reeves just made a ‘perilous…oversight’
And just listen to The Association of Professional Staffing Companies (APSCo).
Speaking after the 2025 Spending Review, the association said:
“It’s perilous to overlook the corporate landscape. Companies are nimble and move quickly. So while we welcome investment in longer-term skills and economic growth, the short-term must not be neglected. Unfortunately, we are already seeing the impact of this oversight, with offshoring and hiring freezes being more acutely felt.
“Unemployment levels are now at their highest levels in nearly four years and reports today suggest that a quarter of a million jobs have been lost since the Autumn Budget. This needs to be urgently addressed.”
An Employment Rights Bill from an overoptimistic government
Surely leaving this government in no doubt that it should be on a ‘report card’ for its workplace measures, APSCo added:
“Given the lack of comprehensive impact assessment, the government is hedging its bets that British business will suck up the costs and uncertainty of the fundamental labour market change the Employment Rights Bill (ERB) promises.
“Only business can deliver the much-needed growth to support this Spending Review. We fear that their optimism is unfounded, given the potential for international outsourcing.
“We ask them to reconsider the breadth of the measures and undertake detailed updated impact assessments now, whilst the bill is still in parliament.”
The position of IR35-fatigued contractors (isn’t enviable)
It’s the bill that contains what Reeves trumpeted – the zero-hours ban, the ending of hire-and-fire, and so on. So I sense that amendments to the ERB are possible, albeit probably not to the extent that APSCo wants to see.
As to contractors in particular – the very people APSCo and REC member companies place in roles every day, to call them ‘fatigued’ from legislation affecting their work is probably an understatement, but that is the politest I can put it.
Contractors have long fought the IR35 battle.
But now, even those individuals who thought they were signing up as employees because they saw the comparatively safe-sounding label of ‘fixed-term’ on the contract they just landed, are finding themselves in a contractor-style firing line. With neither the freedom nor the benefits.
Three things are needed to combat ‘fixed-term, no benefits’ roles
What’s needed now from policymakers, ministers and end-hirers is:
- Clarity in contract structures, so workers know where they stand
- Accountability for hiring practices that offload risk onto individuals
- (Government) policy consistency: no more claiming to defend worker rights while enabling frameworks that hollow them out
Priorities, fairness and what bubbles beneath…
To these three things vital to tackling ‘fixed-term, no benefits’ jobs, I can add that the already promised regulation of umbrella companies, the umbrella company tax compliance plan (of shifting umbrella employees’ PAYE to recruitment agencies), and Labour’s promised employment review, all need to be prioritised as an urgency.
If Labour (or any political party serious about forming a successful government), is serious about restoring fairness to the workplace, they must take a hard look at what’s happening under the surface.
Because what’s emerging is not a flexible workforce. It’s a risk-shifted, benefits-deprived shell of employment, and it is actual “working people” – and that includes contractors – who are paying the price.
Getting support
Navigating IR35 legislation and ensuring compliance can be challenging for contractors and businesses alike. Kingsbridge offers tailored support, including expert guidance on IR35 status assessments, compliance strategies, and risk mitigation. Their team is dedicated to helping contractors and businesses understand and adapt to the evolving tax landscape.
They also offer a range of flexible business insurance options to support contractors, including Professional Indemnity, Public Liability, and Employers’ Liability cover, as well as add-ons like Cyber Insurance and Director and Officer’s Liability.
To find out more, get a quote or contact their experts today.
Anthony Mellor brings over 46 years of expertise in accountancy and business consultancy, specialising in Excel. His firm, Mellor & Co, caters to contractors, freelancers, small businesses, sole traders, and partnerships across the UK.
A chartered accountant since 1984, Anthony focuses on business risks, compliance, and financial planning to help firms succeed.
