The Taylor review of Modern Working Practices
What is the Taylor review?
The Government commissioned Matthew Taylor in 2016, along with three expert panel members to review modern employment practices and report back on how employment practices could keep pace with current business models. On 11 July 2017 Matthew Taylor published his Good Work Report which puts forward recommendations for better working practices in the UK.
Why did the Government do this?
It is estimated that 15% of people working in the UK are now self employed and engaged by businesses on a flexible basis. This figure is set to grow as working practices continue to change. In some sectors/industries working status has been blurred and in some cases abused. As a result we have seen a number of what are called the “gig economy” cases – Uber, City Sprint, Excel and Pimlico Plumbers. All these cases were bought by individuals who were identified by the company they worked for as self employed, but felt that the way they worked did not truly reflect self employment.
Determining whether someone is employed, self employed or a worker is confusing and this is made more difficult because HMRC and the employment tribunals apply different definitions, tests and criteria to determine employment status.
What is the purpose of the Good Work Report?
The intention of the report is to achieve fair working practices across the economy. The report puts forward various recommendations to improve the working conditions of atypical workers and individuals working in the gig economy as well as to assist the government to improve employment working practices generally in the UK.
The report seeks to tackle exploitation and the potential for exploitation in the work place, increase clarity in the law and over the long term align the incentives driving the UK labour market with its modern industrial strategy.
What is an atypical worker?
This is a catch all phrase which describes individuals whose work patterns do not fit into the classic or traditional concept of an employee working for a single employer under a contract of employment. An atypical worker can be an employee, a worker or self employed.
Examples of atypical workers are:
• agency workers
• casual workers and people working on zero hour contracts
• consultants and self employed contractors
• fixed term workers
• part-time workers
What is the “gig economy”?
It’s a term used to describe a number of working practices to include:
• a temporary job
• short term contract
• freelance work
In most instances we see these working practices being used in what is described as the “on-demand” economy - businesses using an online platform such as Uber which sell goods and services to people and use self employed contractors to sell or provide those goods and services.
The key recommendations
The report has made a number of recommendations. We set out some of the key ones below, namely that:
1. employment definitions should be the same for both employment and tax purposes. This is a helpful recommendation as it would mean that decisions from the tax tribunal should be binding for employment law purposes and vice versa;
2. the government should provide a free online tool for determining employment status. We see this as being a very useful tool for both employers and individuals as a useful starting point;
3. the increase in class 4 NICs for self employed individuals was supported by the report. The reason for this is that the report identified that the different rates of NICs depending on employment status has made it possible for the creation of tax avoidance working practices;
4. there continues to be a need for the current ‘three tier’ approach: employees, workers and self-employed so it should be retained, but it needs to adapt and there should be greater clarity between “worker” status and self employment as this is where the greatest risk of vulnerability and exploitation lies and the report recommended that individuals who are eligible for worker rights but who are not employees should be defined as ‘dependent contractor’;
5. when defining dependent contractors the definition should include:
(a) removing the requirement for workers to perform work personally; and
(b) a greater emphasis should be placed on control; and
6. the Government should adapt piece rates legislation to ensure those working in the gig economy are still able to enjoy maximum flexibility whilst also being able to earn the National Minimum Wage (NMW). This means that gig-economy workers who undertake output work should be paid for the work conducted rather than an hourly rate but in doing so, the platform provider must be able to demonstrate through the data that they have available that an average individual, working averagely hard, successfully clears the NMW give or take a 20% margin of error;
7. the Government should ask the Low Pay Commission to introduce a higher NMW rate for hours that are not guaranteed as part of the contract. The report believes that this would incentivise employers to schedule guaranteed hours as far as reasonable within their businesses. This will not prevent employers from still employing individuals on casual / zero hour contracts but it will mean that it will be more expensive for the employer if staff are asked to work more than the guaranteed hours. According to the Office of National Statistics, in March 2017, there were an estimated 905,000 people on “zero-hour contracts”. This could therefore be very costly to employers;
8. there should be a statutory requirement for employees and dependent contractors to receive a written statement on day one of their work. In respect of dependent contractors they should be informed of statutory works rights, how their pay will be calculated and how they will be paid;
9. there should be an increase to the reference period for holiday pay calculation, for those without normal working hours, from 12 weeks to 52 weeks. The reasoning for this is that workers, especially those on zero-hour contracts are much more likely to be put to detriment if the period is too short to reflect a true average of their weekly earnings;
10. workers should be allowed to elect to have ‘rolled up’ holiday pay, i.e. it is paid rather than taken, which at present, is not permitted. This could result in circa 12.07% premium on workers’ pay. Safeguards would need to be provided to ensure that workers are not forced to take the pay rather than holiday and we are curious to see how this would apply to individuals with numerous worker contracts;
11. there should be a right for agency workers to request a direct contract of employment if they have been placed with the same hirer for 12 months and an obligation on the hirer to consider the request in a reasonable manner;
12. there should be a right for those working on zero hour contracts to request a contract of guaranteed hours that better reflects the actual hours they work when they have been in post for 12 months;
13. there should be free determination by the tribunal of an individual’s employment status before a claim progresses in the tribunal;
14. there should be a presumption of employment or worker status and the burden of proof where employment status is in dispute, should be reversed so that it rests with the employer to prove that the individual is not employed. If this is implemented, employers will need to have very clear contractual documentation in place;
15. Statutory Sick Pay (SSP) should be a day one right, open to workers, regardless of income and it would accrue during the year, akin to holiday;
16. the gap between periods of work or jobs should be increased to one month before continuity of employment is broken. At present generally a gap of a week between job assignments will usually be deemed to break continuity of service for those working on assignments. If this is implemented this could give rise to a lot more employment tribunal claims and would have a significant impact on some sectors such as the education sector who engage teachers/lectures on fixed contracts with regular breaks in service over the school holidays; and
17. a right should be created for those on long-term sick to return to the same role or a similar one, akin to the protection afforded to those who go off on maternity leave.
The report is an extensive read and the above is simply a summary but for a full copy of the review:
It is exceedingly difficult to strike the perfect balance of fairness between employers and employees/workers; we regularly hear, from both sides that the other side holds the power. Part of the Review was to ensure that employees/workers are treated fairly and with dignity.
Having looked at the Review, we consider that the report and its recommendations are helpful in particular in respect of seeking to push the government to have clear definitions around employment status. However if some of the other recommendations are implemented it will impose more work and more liability on employers who will have to have tighter processes and documentation recording the working relationship in place. In addition some of the proposals will give rise to some new brand types of employment claims being available to individuals.