The ‘Taylor Review of Modern Working Practices’ published its findings on 11 July and employment lawyers, businesses and commentators are getting to grips with the implications of its recommendations.
The review calls on the Government to adopt the ambition that all work should be fair and decent, and makes a number of recommendations for improving employment protection for atypical workers.
In summary, the most significant points are:
- Legislation should be updated to clarify exactly what the legal tests are for different types of 'worker' status. The key criteria that define ‘employee’ status (namely personal service, control, mutual obligation and whether the individual is carrying out a business undertaking) should be enshrined in primary legislation, using secondary legislation and guidance to provide more detail.
- The current three-tier approach to status (i.e. ‘self-employed’, ‘worker’ and ‘employee’) should be retained, but a ‘worker’ should be renamed ‘dependent contractor’.
- The requirement for someone to perform work “personally” for the employer should not be a barrier to them gaining ‘dependant contractor’ status. ‘Control’ should be of greater importance and more clearly defined (“not simply in terms of supervision of day-to-day activities”).
- The review also suggests that the Government should create a free online tool that provides individuals with an indication of their employment status, similar to the current HMRC employment status indicator.
Terms of employment
- "Dependent contractors" should, on day one, have the right to receive a written statement of employment particulars, including the statutory rights that they are entitled to, as well as how these entitlements are calculated and paid. This is similar to the right currently enjoyed by employees. In addition, dependent contractors should have a standalone right to bring a claim for compensation if employers fail to provide a statement.
- The review appears to conclude that zero-hours contracts are welcomed by some workers and should not be banned. However, recognising that the system could be open to abuse, zero-hours workers should be entitled to request a contract that guarantees hours which better reflect their actual hours worked after 12 months. Crucially, employers should publish figures about the number of requests received and granted.
- The review notes that there needs to be in-built flexibility to enable the law "to respond dynamically to changing conditions and relevant case law". The Government should therefore ask the Low Pay Commission (LPC) to advise on the impact of bringing in a higher National Minimum Wage for hours which are not guaranteed in a contract.
- In order to make it fairer for individuals who have peaks and troughs in work (i.e. seasonal, casual, and zero-hours workers), the pay reference period for holiday pay should be increased from 12 to 52 weeks.
- Individuals should also have the choice to be paid ‘rolled-up’ holiday pay, receiving a premium of 12.07% on their pay instead of paid time off.
- Statutory sick pay (SSP) should be reformed so that it becomes a basic employment right, comparable with the National Minimum Wage. However, the right should accrue based on length of service so that employers do not have to give the full six months of SSP to individuals who have only worked for them for a short time.
- Casual workers should not be denied employment rights simply because of a difficulty in establishing the minimum period of continuous employment needed to qualify. At the moment, a gap of one week is permitted before continuity is broken and the review recommends that this should be increased to a month.
- Pregnant women and those on maternity leave are vulnerable to employers reducing their hours to zero without expressly dismissing them. Therefore, the review recommends that further protection is offered to protect such workers in the gig economy. It also calls for statutory sick pay to be universally available from the first day of employment.
- Companies such as Uber that use technology platforms to commission work should use the data these apps generate to give workers a more accurate guide of their potential earnings - so workers have the freedom to choose lower-rate jobs if they want to.
- The National Minimum Wage legislation should be adapted to ensure that workers who are compensated based on output earn at least 20% more than the National Minimum Wage.
- The review found that some companies were relying on temporary workers to fill longer-term positions, with the result that the same agency worker was doing the same job for years without being taken on as an employee. Agency workers should therefore have the right to request a direct contract of employment if they have been placed with the same organisation for 12 months.
- The review has called for the abolition of the ‘Swedish derogation’ in the context of agency work. This derogation allows agency workers to opt out of receiving the same pay as permanent staff member doing the same job in return for receiving some payment between contracts. This recommendation is to assist in trying to avoid the exploitation of agency workers who may be drafted in to work cheaply alongside permanent staff.
Information and consultation
- The review suggests an extension to the rights contained in the Information and Consultation of Employees Regulations 2004 to improve employee engagement. Currently, the regulations only oblige the employer to enter into negotiations about establishing workplace representatives when 10% of employees request it. The review recommends that the regulations should extend to employees and workers and the threshold should be reduced to 2% of the workforce.
- The Government should also work with Investors in People, Acas, trade unions and others with extensive expertise in industrial relations to promote the development of better employee engagement and workplace relations, especially in sectors with significant levels of casual employment.
- The Government should introduce new duties on employers beyond a certain size to report (and to bring to the attention of the workforce) certain information on workforce structure, including:
- Make public their model of employment and use of agency services beyond a certain threshold.
- Report on how many requests they have received (and the number agreed to) from zero-hours contract workers for fixed hours, and from agency workers for permanent positions, after a certain period.
Tax and national insurance
- National Insurance contributions for employed and self-employed workers should be moved "closer to parity". Taylor says that the "principles underlying the proposed National Insurance reforms in the 2017 Spring Budget are correct".
- The Government should ensure that technology supports the self-employed or gig workers to calculate and pay their tax correctly.
- Cash-in-hand payments for jobs should be phased out and replaced with electronic transactions via platforms such as PayPal.
Tribunals and enforcement
- The review concludes that "action is needed to ensure employment protections are enforced and that vulnerable people have confidence that they will get redress for exploitation". It should be free for individuals to apply to the tribunal for an assessment of their employment status, and that the burden of proof in cases where employment status is in dispute should be placed on the employer.
- In addition, the Government should make the enforcement process simpler by taking enforcement action against employers who do not pay employment tribunal awards, and it should establish a “naming and shaming” scheme within a reasonable time.
- The report also suggests that the powers of HMRC should be extended to include the power to investigate failures to pay holiday pay as well as sick pay and the National Minimum Wage and to penalise defaulting employers accordingly.
A number of trade unions have condemned the review as a “wasted opportunity” given that, for example, it does not recommend a ban on zero-hours contracts, or scrapping tribunal fees entirely. Commenting after the publication of the review, TUC General Secretary Frances O’Grady said:
“It's no secret that we wanted this review to be bolder. This is not the game-changer needed to end insecurity at work.”
Neil Carberry, CBI Managing Director for People and Infrastructure, said:
“Spreading good practice, not just focussing on new laws, is something the CBI has long supported given the link between good employee relations and higher productivity, which is the only sustainable route to rising wages and better living standards. A number of proposals in the report will be of significant concern to businesses, however. Changes to the application of the minimum wage, rewriting employment status tests and altering agency worker rules could have unintended consequences that are negative for individuals, as well as affecting firms’ ability to create new jobs.”
The review makes some significant recommendations which, if implemented, could make a real difference to those on zero-hours contracts and the self-employed, and a number of the measures may well simplify the complex area of employment status.
However, with suggested action "ranging from specific changes in the short-term to longer-term strategic shifts", it remains to be seen which of the recommendations makes it onto the statute books. The Prime Minister said the Government would study the review’s contents carefully over the summer and respond in detail later in the year. The Government will have to consult on the recommendations before bringing forward new legislation and we will keep you up to date with the various consultations as they become available, possibly in the autumn.
For further information about the Taylor review and its possible implications for your business, please contact Duncan Snook or Jeremy Nixon in Thrings’ Employment and Immigration team.