Response to the Taylor Review of Modern Working Practices.

The government has, at last, published its full response to the Taylor Review of Modern Working Practices, alongside four new consultations on its wide-ranging proposals to take forward the recommendations in that review.

The key proposals, outlined in the consultation response and detailed in the new consultation documents, are as follows:

  • To make it easier for individuals and businesses to determine whether someone is an employee, a worker or self-employed. This will “include consideration of legislative options” to decide whether alternative statutory approaches could provide greater clarity and certainty. The proposals are covered by the employment status consultation, open until 1 June 2018, which considers employment status for the purposes of both employment rights and tax “in order to tackle this issue holistically”. The rebuttable presumption of 'worker' status (a reversal to the existing burden of proof) as recommended by the Taylor Review is not being taken forward at this stage. The government will also consider developing an online tool to assist in the determination of employment status, once the new legislative framework has been decided.
  • A review of how the definition of working time should apply to those working in the gig economy (app-based platform workers) for the purposes of calculating entitlement to the national minimum wage (NMW), is also covered by the employment status consultation.
  • To improve transparency for those engaged to work under casual arrangements. This will extend the statutory right to receive written particulars (a ‘section 1 statement’) and the right to receive a payslip, to all workers (not just employees) from day one. The government also proposes to increase the pay reference period under the Working Time Regulations 1998 from 12 to 52 weeks, to help ensure that atypical workers receive the correct amount of holiday pay, reflecting fluctuations in working patterns over a more representative period. These proposals are the subject of the consultation on measures to increase transparency in the UK labour market, open until 23 May 2018.
  • A proposed right for all workers (including agency workers) to request a more “predictable and stable contract”. There is no explanation of what the government would consider to be a “predictable and stable contract”, although the Taylor Review proposed that zero-hours workers should be entitled to request a contract with guaranteed hours. Note, this would be a right to request only and it would potentially be subject to a qualifying period – the Taylor Review suggested a period of 12 months. The government also proposes to extend the period necessary to break continuity of service, which is currently set at one week. These proposals are also covered by the transparency consultation.
  • The Low Pay Commission is being tasked to consider the impact of introducing a higher rate of NMW for hours that are not guaranteed under a worker’s contract. The LPC will provide an assessment of the impact in their October 2018 report to ministers.
  • Improving protections for agency workers. This includes plans to improve transparency over pay and to examine to what extent the 'Swedish Derogation' under the Agency Workers Regulations 2010 is abused (where agency workers are paid between assignments, exempting them from the entitlement to equal pay with permanent employees). One option might be for the derogation to be repealed. This is the subject of a separate consultation on agency workers recommendations, open until 9 May 2018.
  • To better enforce a wider range of basic employment rights for low-paid workers, particularly sick pay and holiday pay, through HMRC enforcement powers. This proposal is covered by the consultation on enforcement of employment rights recommendations, open until 16 May 2018.
  • Simplifying the process for the enforcement of employment tribunal awards, introducing a new ‘naming and shaming’ scheme for unpaid employment tribunal awards and the introduction of penalties for employers who ignore previous employment tribunal judgments and fail to take corrective action. The government is also considering whether to increase the existing penalties for aggravated breaches of employment legislation, from £5,000 to £20,000. These aspects are all covered by the enforcement consultation.

Next steps

The majority of the government’s proposals are couched in terms of information-gathering and further consideration of the options, rather than committing to concrete reforms. At present, we have no draft legislation and no confirmed timescales for introducing any of these proposals. Whether they are all taken forward will depend on government priorities and political will over the forthcoming months, neither of which is guaranteed. However, the proposals do represent small, but significant, steps in attempting to resolve at least some of the uncertainty faced by those engaged in insecure and irregular work, particularly in the gig economy.

Proposals not being pursued

Some good news, hidden away on page 58 of the government’s response, is confirmation of the decision not to take any further action to limit or prevent the use of contractual non-compete clauses (restrictive covenants), which was the subject of a 'call for evidence' back in 2015. The majority view, accepted by the government, was that restrictive covenants are valuable and necessary and do not unfairly affect an individual’s ability to find work.

The government has also confirmed that it is not taking forward the recommendation in the Taylor Review that differences in levels of National Insurance contributions between employees and self-employed contractors should be reduced. Changes to rates of tax or NICs are beyond the scope of the current proposals.