At the end of 2016 the government launched a review of the UK labour market to consider the implications of new forms of work on workers' rights and responsibilities, as well as on employers' freedoms and obligations. The main recommendations in the Taylor Review, which was published today, are as follows:

  • The three status approach - employee, worker and independent contractor - is retained but with the intermediate 'worker' category re-designated as 'dependent contractor' and self-employed re-designated as 'zero hours' with a recommendation for a new simpler, clearer statutory delineation between the three categories to give a greater level of certainty and understanding of what employment status applies.

Clyde & Co LLP comments: The review rightly acknowledges the need for a simple and clear test so everybody knows where they stand, but then goes on to say it is up to the government to decide what that test is. Companies, individuals, lawyers and the judiciary have grappled with this for years and despite best efforts there is an abundance of often contradictory case law and a current situation where each case rests on its own unique facts.  Were there to be a simple solution then it would be surprising the courts have not yet found it.

  • The new category of 'dependent contractors' is intended to capture those who have 'worker' status but do not have 'employee' rights. They would be entitled to basic protection (such as national minimum wage (NMW), paid holiday (or the right to enhanced pay in lieu) and other existing 'worker' rights), and have the right to a written statement at the start of their engagement. The review recommends that in assessing whether an individual is a dependent contractor, there should be a greater emphasis on the degree of control they have rather than whether they are required to perform the work personally.
  • Dependent contractors will have the right to earn the NMW if they choose to do so based on the 'output work' (piece rate) in the NMW legislation.  However the NMW rules would be adapted so that if dependent contractors chose deliberately to work at a time of low demand they would lose that entitlement.  Technology available via platform based apps could be used to tell the individual in advance what the demand is so they can make an informed choice whether or not to work, and so retain two-way flexibility.

Clyde & Co LLP comments: The piece work approach based on the minimum wage is sensible.  It harnesses big data and technology to balance two-way flexibility but with a safeguard. If individuals choose to work at a time of low demand knowing that to be the case in advance, via the app based platforms, they do so having made an informed choice and knowing their earnings may fall below the NMW rate.

  • There will not be a ban on zero hours contracts but instead, after 12 months an individual will have the right to request a guaranteed hours contract.  The starting point for the guaranteed hours would be the average weekly hours worked over the previous 12 months. The review also recommends that the Low Pay Commission should advise on the impact of introducing a higher NMW for hours that are not guaranteed in a contract so that businesses could still use zero hours and short hours workers, but they would be paid at a higher rate.

Clyde & Co LLP comments: The review acknowledges that a ban on zero hours contracts would negatively impact more people than it helps. Instead it seeks to draw a fair balance so that those who have worked for 12 months, and so established a degree of permanence, can request a guaranteed hours contract based on the average weekly hours worked over the prior year.  While the employer would not have to agree it, the 'right to request' legislation in other areas has worked well.        

  • Similarly, agency workers engaged by a hirer for 12 months will have the right to request a direct contract from the hirer which must consider that request in a reasonable manner. In addition, the 'Swedish derogation' should be abolished. This model currently allows agency workers to opt out of equal pay with permanent employees and instead receive a minimum level of pay between assignments.

Clyde & Co LLP comments: Businesses will be concerned about the proposal to remove the Swedish derogation model.  If the government accepts Taylor's proposal, it may end up doing more harm than good because many businesses will simply end an agency worker's assignment before the 12 week qualifying period for pay and benefits parity with a hirer's permanent employees

  • There should be greater enforcement action to prevent unpaid internships to stamp out abuse and improve social mobility.
  • Steps should be taken to ensure taxation is consistent across all forms of employment and to align the employment status and tax status frameworks, to reduce differences between the two systems to a minimum.
  • There shouldn't be an explicit extension of workplace consultation/representation (except for widening the rules on entering negotiations about establishing workplace representatives when 2% of employees request it (currently the threshold is 10%)) but an acknowledgement that strong employee relations and responsible corporate governance are important in establishing 'better work'.    
  • There is a more pro-active approach to workplace health, including a recommendation that the current statutory sick pay (SSP) should be reformed so that it is a basic employment right available to all 'workers' but that the right should accrue on length of service, so those who had only been engaged for a short time would not be entitled to six months' SSP.  In addition, the review recommends that the relevant government departments explore ways of developing an integrated approach to improving health and wellbeing at work.
  • So that seasonal, casual and zero hours workers have better access to holiday pay, the pay reference period should be increased from 12 to 52 weeks.

Clyde & Co LLP comments: Although the review is definitely a step in the right direction, it fails to provide a much needed silver bullet to overcome the issues at hand – most significantly, while it identifies the problem of the often grey boundaries between the three employment status categories, it shies away from suggesting what the answer is, or even what it could be.

Click here to read the Taylor Review.