The government will promise to scrutinise how workers are classified with a rising number of people working in the so-called gig economy, popularised by tech companies such as Uber and Deliveroo.
Business and industry will be consulted on plans that could lead to changes to the current statuses that exist in law – employed, self-employed and worker – in what could be "the biggest shake up of a generation" according to one business group.
The move comes as part of the government's response to a major independent review into the gig economy and "modern work".
Authored by Matthew Taylor, the chief executive of the Royal Society of Arts, it called for several new measures to ensure "good quality work for all" amid growing concern over the rights of workers and several high profile employment tribunals in recent years over the status of gig economy workers.
In addition to efforts to bring greater clarity to the grey area of "employment status", the government plans to give sick and holiday pay rights to people from the first day of working, in the same way they are entitled to the national minimum wage now.
The Low Pay Commission will also be asked to consider making the minimum wage higher for people on zero hours contracts. And a loophole known as the Swedish Derogation which allows agency staff to be paid less than employees doing the same work could be closed.
“We want to embrace new ways of working, and to do so we will be one of the first countries to prepare our employment rules to reflect the new challenges," said business secretary Greg Clark. “We will take forward Matthew Taylor’s recommendations and commit to pursuing the quality of work as well as number of jobs."
But the government has written off a suggestion to increase National Insurance contributions for the self-employed in line with the employed. Chancellor Philip Hammondlast year made a u-turn on such a move proposed in his Budget after a backlash.
"This could be the biggest shake-up of employment law in generations." said director general of the institute of Directors (IoD) Stephen Martin.
"However, while they have accepted almost every single recommendation from the Taylor Review, and in some cases even gone further, the lack of action on tax reform is a wasted opportunity."
And the entire shake up was slammed by a leading think tank which warned that the measures risked reducing flexibility.
"The government often declares that the UK is open for business, yet is threatening to pile more onerous regulations and costs onto employers. These would inevitably be passed on to consumers and workers themselves," said Mark Littlewood, director general of the Institute of Economic Affairs.
Read more: MPs push for new gig economy laws
Greater clarity on employment status will likely be welcomed, however. Uber and Deliveroo have both previously indicated that the laws need updating for the modern age.
And Martin said: "One-quarter of IoD members say they don’t fully understand the difference between employment categories because of the blurry boundaries between the separate employment types. In a system where the same person can be an employee for the purposes of employment rights and self-employed for tax purposes, it is confusing for both employers and their staff.
“The government is right to say it will do more to root out abuses in the system and stop bad employment practices undercutting fair competition or exploiting workers, but it must do so by letting good employers know where they stand first."
Taylor, a former policy expert for Tony Blair said he welcomed "the direction indicated today" when it comes to action on employment status, "but there is more work to be done to encourage the government to be bold in living up to its commitment to good work for all".
The government's full response is due to be published on Wednesday morning.