The much anticipated Taylor Review into modern working practices has been published. The focus of the Review is the aim of creating “good work” for all which is “fair and decent and has scope for development and fulfilment”. As expected (and in line with the Review’s terms of reference) there are suggestions for improving the rights and entitlements of self-employed workers especially in the so-called gig economy.
Currently, those who fall into the category of “worker” (which sits somewhere between and overlaps with both employees and self-employed contractors) qualify for some statutory employment rights such as the National Minimum Wage (NMW), paid annual leave, rest breaks and limits on their working time, protection from discrimination, whistle-blower protection and the right not to have unlawful deductions from their pay. However, they do not qualify for protection against unfair dismissal (the principal employment protection right) nor for rights such as paid maternity, paternity and adoption leave. Some may qualify for statutory sick pay and employer pension contributions under the auto–enrolment provisions while others may not.
In relation to employment status, the Review recommends:
- The current three tier approach to employment status (ranging from employee through to worker to self-employed contractor) should be maintained since it remains relevant in the modern labour market
- The existing classification of “worker” should be renamed “dependent contractor”
- The Government should introduce new legislation to distinguish those workers who are eligible for workers’ rights from “legitimate” self-employed contractors who are not – “Ultimately, if it looks and feels like employment, it should have the status and protection of employment“
- The test for worker status should be realigned so that there is more of a focus on the degree of control operated by the employer over the way a person works as opposed to whether the person is required to perform work personally
- Primary legislation defining employees and workers should be amended so that common law principles are mirrored in the legislation itself, possibly with supporting secondary legislation
- In re-defining “dependent contractor” status, the Government should adapt existing legislation to ensure those working in the gig economy are still able to enjoy maximum flexibility whilst also being able to earn the NMW
- To retain flexibility for those that want it, “dependent contractors” who choose to work at low demand times in the full knowledge of the lower rate of pay they will receive at that time should not be able to bring a claim against their employer for not paying them the NMW
- The legal tests for determining employment status applied by employment tribunals and the tax authorities (which are currently different and can result in different outcomes on the same set of facts) should be aligned to ensure that differences between the two systems are reduced to an absolute minimum
- “Dependent contractors” should have a right to receive a written statement of the main terms of their employment on day one (in a similar way to employees) and they should have a standalone right to claim compensation if this is not adhered to
- The Government should develop an on-line tool for individuals (and their employers) to use to determine their employment status
Zero hours contracts remain controversial and, although there is no suggestion of a ban, the Review calls on the Government to:
- Give those on zero hour contracts the right to request fixed hours after 12 months of work
- Force employers to disclose how many requests for regularised hours they have received and how many they have acceded to
- Consider introducing a higher NMW for those working non-guaranteed hours as an incentive to encourage employers to offer regularised hours to zero-hour contractors
In relation to flexible working especially by agency workers, the Review recommends that the Government should amend the legislation to:
- Extend, from one week to one month, the relevant break in service for the calculation qualifying period for continuous service and clarify the situations where cessations of work could be justified
- Improve the transparency of information which must be provided to agency workers both in terms of rates of pay and those responsible for paying them
- Introduce a right for agency workers who have been placed with the same hirer for 12 months to request a direct contract of employment and a corresponding obligation on the hirer to consider the request in a reasonable manner
The Review also recommends that the Government makes some significant reforms to more general employment rights such as:
- Reforming statutory sick pay (SSP) by explicitly making it a basic employment right available from day one for all workers which accrues in the same way as annual leave
- Giving individuals a default right to return to work following long-term sickness absence in the same way as, for example, those returning from maternity leave currently have
- Reforming holiday pay by doing more to promote awareness of holiday pay entitlements
- Increasing the pay reference period to 52 weeks to take account of seasonal variations
- Giving dependent contractors the opportunity to receive rolled-up holiday pay
The Review makes various suggestions for improving employment relations and giving employees a “voice” in the workplace. Again the Review calls on the Government to amend the existing Information and Consultation of Employees Regulations (which require employers with 50 or more employees to establish a mandatory works council of employee representatives if so requested by 10% of employees) to include both employees and workers and to reduce the threshold from 10% to 2% of the workforce making the request.
Controversially the Review makes a number of recommendations for changing the Employment Tribunal rules and procedures to establish an individual’s employment status to:
- Ensure individuals are able to get an authoritative determination of their employment status without paying any fee and at an expedited preliminary hearing
- Reverse the current burden of proof in employment tribunal hearings where status is in dispute so that the employer has to prove that the individual is not entitled to the relevant employment rights not the other way round
- Make the enforcement process simpler for employees and workers by taking enforcement action against employers/engagers who do not pay employment tribunal awards without the employee/worker having to fill in extra forms or pay an extra fee and having to initiate additional court proceedings
- Establish a naming and shaming scheme for those employers who do not pay employment tribunal awards within a reasonable time
- Allow tribunals to award uplifts in compensation if there are subsequent breaches against workers with the same or materially the same working arrangements
The parameters for the Review did not extend to changes in tax policy; nevertheless, Matthew Taylor stuck to his word and did not shy away from highlighting the issue. While the Review does not go so far as to say that employers should have to pay Employers’ National Insurance Contributions (NI) on the sums they pay to workers or to self-employed contractors, the Review believes that “the principles underlying the proposed NI reforms in the 2017 spring budget are correct. The level of NI contribution paid by employees and self-employed people should be moved closer to parity while the Government should also address those remaining areas of entitlement – parental leave in particular – where self-employed people lose out”. The Review invites the Government over the coming years to examine ways in which the tax system might “address the disparity between the level of tax applied to employed and self-employed labour”. However, it is questionable how far this will be taken with the backlash which was received following the (now reversed) policy announcement on increased NI Contributions for the self-employed.
With an estimated 4.79 million self-employed people in the UK and over 1 million working within the gig economy the Taylor Review was eagerly awaited. The trend in recent months in the tribunals and courts has certainly been that many of those previously classified as self-employed should have worker status and the ensuing rights. It was perhaps predictable that the Taylor Review would follow suit and seek to ensure greater protection for those working in the gig economy.
Some of the proposals seem to be more wishful thinking than rooted in reality such as the suggestion that individuals should have a fast track free service to the (already overburdened) employment tribunal system to determine the highly complex issue of their employment status. Rebadging “worker” to “dependent contractor” is unlikely have any practical or legal effect except perhaps to add to an already confused classification. Incorporating the volumes of case law which go back decades into the relevant statutory definitions of “employee” and “worker” could well result in more not less litigation and could limit the freedom of the courts and tribunals to make decisions reflecting individual circumstances.
So far the Review has had a lukewarm response from both sides of industry, with organisations representing businesses and trade unions expressing their disappointment and reservations. However, given that the lion’s share of Parliamentary time over the next two years will be taken up with complex Brexit legislation and that the Government has only a slender majority, it is entirely possible that the called-for changes to existing employment laws will not be made, at least during the current term.
Please click here for the full Taylor Review
See our employment status – the barometer hub for a full consideration of all the recent cases, reviews and a table setting out the true impact of employment status. We are also offering an employment status audit where we can assess your workforce and the employment status of the different categories of individuals.
Kirsty Rogers, partner, employment
Jon Keeble, partner, employment
Helga Breen, partner, employment
Sam Dooley, associate, tax
or your usual DWF contact.