Modern work: fl exibility, rights, jobs, tax 1 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Contents Introduction: 3 Just about managing His masters’ voices? 7 Bumps in the road to platform working and selective tasking Border control: 11 Policing employment status Competing in the new Europe: 17 Industrie 4.0 / industrie du futur Benefit gig: 23 New relationships, new benefits, new model UK financial services Special agencies: 31 Recruitment and flexibility in Germany and the UK Conclusion: 35 Can we do better? Taylor Wessing 43 Contacts DRAFT 2|PB DRAFT 3 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Introduction: Just about managing “Small but growing as it is, the platform economy is the ‘Godzilla’ that represents general anxiety about work and rights in the 21st century.” The legal and political issues around the future of work have dominated the thinking of business since we wrote “Modern work: technology, change, brand, risk” in 2015. Litigation around Uber and worker status formed the ‘case of the year’ in the UK and elsewhere. Discussions about employment status, which are really about the rights people have in relation to work, have dominated in many developed economies. Why so, when gig economy or online platform work involves only 6% of independent workers, by some estimates?1 X Independent work is growing – no one knows by how much, and there is limited research on why. But all sources agree that it is, and in many cases it is positively chosen. X Where it is growing is patchy – it seems to be declining in Germany, and across the EU there are inconsistent levels. So forming common policy on an international basis is difficult. X Across most countries, the tax and social security ‘take’ for this work is less, and so are the social and legal rights that people have. X The combination of technology and demographic change – “Daddy, a robot ate my job” – heightens the generational insecurity that has plagued Western consumer and worker considerations since the financial crisis. Small but growing as it is, the platform economy is the ‘Godzilla’ that represents general anxiety about work and rights in the 21st century. It is a metaphor for disruption, change and insecurity, and “insecurity at work is becoming the new normal for too many workers. It’s happening across new and old industries, with workers forced onto shady contracts whether they are ... drivers, bar staff or teaching assistants”.2 1 Source: McKinsey Global Institute, Independent work: Choice, necessity, and the gig economy, 2016. 2 TUC: quote accompanying report: The Impact of increased self-employment and insecure work on the public finances 2017. DRAFT 4 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future There is the sense of crisis: people are “just about managing” in the 2016 words of the UK’s Prime Minister. And business needs to be seen as just in its management of work. Not all business, and not in the same degree: the sample from larger businesses below is just a snapshot, but it helps identify the potential interplay between job change and consumer attitudes. Demographic and socio-economic drivers of change Chart 7: Demographic and socio-economic drivers of change 0 10 20 30 40 50 60 70 44% 23% 23% 21% 16% 14% Changing nature of work, exible work Middle class in emerging markets Climate change, natural resources Geopolitical volatility Consumer ethics, privacy issues Longevity, ageing societies Chart 8: Demographic and socio-economic drivers of change Source: World Economic Forum, Future of Jobs Survey, 2016. 0 10 20 30 40 50 60 70 Invest in reskilling current employees Support mobility and job rotation Collaborate, educational institutions Target female talent Attract foreign talent Oer apprenticeships Hire more short-term workers 65% 39% 25% 25% 22% 22% 11% Consumer/voter voicings through channels like Sumofus, change.org and others suggest that many businesses need to engage with their people and with potential legal and political disruption. When a job is not just an economic transaction but the most important source of your money, rights, identity and social protection, little wonder that businesses and investors have been caught up in resistance. “Where once ‘sacking’ a worker was a very loaded move, the new, clinical ‘deactivation’ seems quite clear evidence of the perils of app-based employment without any human ties”. Source: Julian Sayarer, Messengers, 2016 Future workforce strategies, industries overall share of respondents pursuing strategy. 4|5 DRAFT 5 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Whatever language we use – and see for example the discussion of control in His masters’ voices later in this publication – people are translating their experiences into actions that employers must anticipate and design for. This means increased union activity, social media mobilisation, litigation and political campaigns. In numbers: out of 4: the success rate for workers and unions so far in an ongoing series of UK cases establishing that they are not independent contractors in UK cases, across various industries. At least five more cases are planned. the number of simultaneous policy reviews in 2017 on the future of work in the UK, with similar discussions in France, Germany, the Netherlands, and throughout Central Europe. the national elections in 2017 where worker rights, migration, international relations and tax are leading issues. perhaps, the generational chance to set the compass for a new road. “… people are translating their experiences into actions that employers must anticipate and design for. This means increased union activity, social media mobilisation, litigation and political campaigns.” 4 3 2 1 In evidence to legislative reviews, large, established businesses like Hermes and Amazon say they could adapt for constraints on the use of the contractor model. But growing businesses like Deliveroo and Uber suggest that their ability to offer opportunity and inclusion would be reduced. Elsewhere, businesses are involved in private promotion of legislation e.g. Handy in the US, which has prepared draft laws enabling online platforms to provide benefits (like employees) without this changing their declared relationship with independent contractors. Around the world, businesses are thinking how to adapt, differentiate themselves and grow in a radically altering environment. When the voting is over, what will remain is the need to navigate these anxieties, and map new European routes to the future world of work. We use the plural for various reasons, and one has to be the changing relationships between EU countries. “The huge opportunity offered by Brexit is to allow our national government to … rethink the basic questions of employment, taxation and the role of government in the 21st century”. Source: Janet Daley, The Daily Telegraph March 2017 In this study, as an international law firm, we show how some of those roads may be mapped. DRAFT 6|PB DRAFT 7 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future His masters’ voices? Bumps in the road to platform working and selective tasking What counts as working time is important, as it goes to the calculation of the selected economic rights to which all workers are entitled. For example, in the Uber case, does the National Minimum Wage (or the recently introduced National Living Wage) just cover time actually driving a customer on a trip? In the UK case, it was determined that “working time starts as soon as he is within his territory, has the App switched on and is ready and willing to accept trips and ends as soon as one or more of those conditions ceases to apply”. A question of status ‘Worker’ is an intermediate category of person who is not an employee with full rights not to be dismissed but is not an independent contractor either. More significantly, from a legal perspective, they have rights to some potentially expensive benefits. There are a number of overlapping tests to determine whether an individual should be considered a worker rather than being engaged on a genuinely self-employed basis. The recent UK Court of Appeal judgment involving a tradesman working via a traditional plumbing business, Pimlico Plumbers, (i.e. not a gig economy type app) is the latest high profile case to consider a number of these tests. The Court focussed in particular on whether the individual is required to provide work personally, or has a genuine and unfettered ability to provide a substitute. Where the agreement between company and individual contains restrictions on the individual for carrying out work for third parties during or after the services being provided to the business in question, this is likely to be suggestive of a worker relationship. Other tests that the courts will consider include assessing the level of integration of the individual into the business of the company (do they work from a company office, using tools and materials provided by the business?) and the level of ‘mutuality’ (is there a requirement for the individual to be offered a minimum amount of work? When offered work, is the individual under an obligation to do it, rather than having a free rein to pick and choose assignments as he sees fit?). PROBLEMS REPORTED There were a few things riders in your city commonly reported. Here are some tips on how to improve: RIDER FEEDBACK On the bright side, you received 23 ve-star reviews out of 26 rated trips in the past two weeks. Service Riders give the best ratings to drivers who: Never ask for a 5-star review, but focus instead on providing an excellent experience Stay calm, patient and polite with riders and other cars on the road Go above and beyond to make the experience special, such as opening doors for riders when possible City knowledge Riders want to be sure you’re following the best route. It helps to: Ask if the rider has a preferred route Always use GPS until you know the city well (remember to press BEGIN TRIP after you enter the destination) Professionalism Riders count on Uber for a comfortable, relaxing experience. They prefer for drivers not to promote other other businesses during the trip 5:00 An email from Uber to a driver, which has been suggested to indicate control following the UK case on worker status Source: Alex Rosenblat and Luke Stark, International Journal of Communication 10, 2016 DRAFT 8 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Drivers start to earn this right as soon as they are available to accept any trip, even if this means they are sat in their vehicle, stationary, for a potentially significant period of time. Circumstantial evidence suggests that, with the increase in people choosing to work via Uber’s app, an insufficient respective increase in service users has made competition for fares fiercer, particularly in recent months. So workers have more incentive to bring claims than the 19 who originally sued Uber. Workers are also entitled to accrue paid time off whilst working – the ability to take holiday and still receive payment as if they were actually working at such time. This is something employees in more traditional workplaces take for granted, at least in Europe, whereas it is not something which is universally expected or offered in the online economy. In the UK a full-time worker is entitled to a minimum of 28 days paid vacation. Pro-rating to gig economy workers and working out how much they actually should be paid each time they take vacation is a challenge. The law currently provides only a small amount of guidance. Juggling is an illusion In the Uber case, evidence was heard that a high number of drivers relied on the platform as their main source of income. But economic models change with market forces, and all the more so if new policy is passed – whether by the EU or in the UK after the Taylor Review. What if a person is not only an Uber driver but also, for example, works on Gett, Uber Eats or is a Deliveroo rider? (For US readers Deliveroo is a popular app across Europe similar to Uber Eats delivering meals from signed up restaurants.) They may have two different apps running at the same time to see which offers them an assignment first. After all, it is consistently an argument run by gig economy businesses that workers have no duty to accept any particular assignment, an indication of self-employment rather than worker or employment status. This is extremely common in the US, where drivers often work for both Uber, Lyft or Juno in New York at the same time. With the increasing number of industries being disrupted by this kind of business model, the options available for a ‘gigger’ are limited only by time and geography. They could be a Taskrabbit tasker, ten minutes later a Lyft driver and delivering meals via Uber Eats an hour after this. Two main questions therefore arise where someone is multi-apping in this way; questions which no court or tribunal has yet had to answer: X 1. is the individual really entitled to be treated as carrying out work for such business for all the time they “have the App switched on and … ready and willing” to accept assignments? X 2. which businesses should at any particular time be responsible for the rights thereby accruing? This highlights a defect of the common law model for dealing with new technologies and practice: evolutionary case law takes time, has an uncertainty cost, and grafts sometimes uncomfortably into EU-derived universal values. If the answer to the first question is ‘yes’, and for example the individual logs into five apps at any one time and makes themselves available to take on gigs through each, then that individual would be entitled to receive from each of those app businesses the minimum wage for all such periods; it would be a practice open to abuse. Similarly, they would accrue the right to take paid holiday for all periods worked in this way and be able to require each app to provide such holiday pay. That would be an unintended consequence arising from an isolated factor in the Uber worker status case. This is something which Uber themselves have referred to when responding to the call for input into a parliamentary enquiry into the future world of work and rights of workers. They observe that “When using Uber, drivers are … entirely free to work elsewhere at the same time, for example delivering parcels for 8|9 DRAFT 9 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Amazon, or to use Uber while also working for a mini-cab firm”. They refer to a case study of one Uber driver who “logged onto the app for 91 hours over one week last year, but took only 18% of the trips that were sent to him. What he did during the other time, Uber cannot know …”. They go on to point out that “if this same driver were classified as a worker, Uber would be required to compensate him on an hourly basis for his time …” and that this would “raise questions as to which ‘employer’ should be responsible for paying this hourly wage if the worker used Uber while also working for another company at the same time. For example someone driving with Uber may also have parcels in their car that they are delivering throughout the day. It would be an odd result for both to be required to pay the minimum wage”. How far will the Taylor Review and UK government go in ‘fixing’ this? See our thoughts on Taylor Review in the Conclusion at the end of this publication. Assuming that in time there should be no ability to accrue multiplied rights, yet to be resolved is exactly how such rights can and should be enforced following such a finding. The responsible employer If someone is working for a variety of businesses from hour to hour, how are such businesses to be responsible for ensuring the payment of minimum wage and holiday? Even if an individual does not open a wallet of apps at one time but rather works for different businesses on different days, the issue still arises; when that individual decides to take a week’s holiday, how should responsibility for funding it be determined? What is to stop someone taking paid ‘holiday’ for a week when they are not working as an Uber driver only to continue to be paid during that week while carrying out Deliveroo assignments? And how to reduce scope for workers to game the system by working long hours to boost holiday pay (e.g. under the UK’s 13-week averaging system)? In the EU, the right to take paid holiday is at least in part a health and safety measure to avoid burn out and there is considered a duty of care on all employers to ensure people are taking holiday to which they are entitled. How does this transpose to the economic valuation of rights and peripatetic nature of a gig economy worker over whom one app cannot reasonably be expected to have control as to what they do when not carrying out their assignments? A further example is the EU cap on maximum weekly working hours. Whether this is maintained after Brexit, we need to wait and see. It is a controversial subject to many, and rights to opt out could be weakened, or even made inapplicable to online workers. Where someone is not opted out from this, to what extent should a platform be required to ensure their workers are not carrying out work for other companies so that their total working hours are not in breach of the law and potentially dangerous from a health and safety point of view? A similar point can be made for the enforcement of daily and weekly rest breaks, further rules set down by European legislation for the protection of the workforce, and which may be ripe for review after Brexit. The UK Prime Minister promised to ‘grandfather’ these EU rights but, with that taking the form of secondary legislation, it would be possible for them to be eroded quickly through Parliamentary action in the short term – if the political will is there and UK policy review cannot find a way to a fair solution. “If someone is working for a variety of businesses from hour to hour, how are such businesses to be responsible for ensuring the payment of minimum wage and holiday?” DRAFT 10 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future The way ahead Where the rights accompanying worker status are monetary in nature, in particular minimum wage and paid holiday rules, it seems difficult to reconcile a system where the worker receives what they are legally entitled to without the risk of double (or treble or quadruple) benefit. It will be interesting to see to what extent this issue can be dealt with in the Taylor Review instead of legal decisions. Perhaps in a world of multi-app working, the most viable solution would be an arrangement whereby each platform in an industry pays a set rate towards a fund from which gig economy workers can be paid in respect of holiday they are entitled to take. There are examples of industry-based benefit plans derived from teaching, healthcare and local government. It would be a strange echo indeed if ‘public-sector’ style solutions like this were evolved for the highly privatised platform economy. And it would not answer the cross-category ‘problem’ of multi-industry workers, unless the technology itself was taxed in this way, or the UK moved closer to a universal benefits system. These thoughts rely on the belief that the tide continues to flow in favour of those engaged in the gig economy being deemed workers. Many of the important decisions have been made only at first instance. But if (as we assume) this happens, rather than focusing on whether individuals should be considered workers and therefore be entitled to certain employment rights, the courts will need to turn their minds to costing these rights and deciding who should be responsible for them and how. Without this clarity, enforcement of those rights will be riddled with difficulties. Of course, the tide could turn. Higher courts may accept that independent contractor models apply on the facts. Equally, platforms may adapt some of their practices to increase the likelihood that their people are self employed. Having taken three years to get to the general recognition of the issues of control and integration for platforms in determining worker status, it is unthinkable that it could take three more years to work out the cost. And it is as troubling for businesses to think that EU and UK methods may diverge sharply. Joe Aiston and Paul Callaghan, London “Perhaps in a world of multi-app working, the most viable solution would be an arrangement whereby each platform in an industry pays a set rate towards a fund from which gig economy workers can be paid in respect of holiday they are entitled to take.” 10|PB DRAFT 11 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Border control: Policing employment status Throughout most countries of the EU ‘atypical employment relationships’ are gaining ground, with a working environment in which self-employment is challenging regular employment relationships in some industry sectors. Status: common motives and concerns The reasons are consistent and balanced throughout: flexibility and efficiency are desired on both sides (‘employer/principal’ and the ‘employee/contractor’), and the common wish to save tax and social security cannot be denied as a key motive. A downside for the contractor of course is a loss of labour law rights (e.g. minimum wage, annual paid leave entitlement, continuation of payments (in case of sickness or incapacity), working and resting time regulations, etc: except for those lucky enough to be UK ‘workers’. See the Introduction and other chapters in this publication. Part of the reason why flexibility and tax concerns go together may be the demographic of those making up the independent workforce. A McKinsey Global Institute survey found casual workers, who may be combining work with study, retirement or other activity, are the largest section of the independent workforce. These may be people less concerned with the long-term benefits attached to tax and social security payments. ‘Casual earners’ are the largest segment of the independent workforce across all surveyed countries “Casual earners” are the largest segment of the independent workforce across all surveyed countries Souce: McKinsey Global Institute, Independent work: choice, necessity and the gig economy, October 2016 0 20 40 60 80 100 United States United Kingdom Sweden Germany France Spain Note: numbers may not sum due to rounding Free agents Casual earners Reluctants Financially strapped 32 40 14 14 32 42 12 14 33 41 13 13 29 42 11 19 29 39 10 21 26 32 21 21 Source: McKinsey Global Institute, Independent work: choice, necessity and the gig economy, October 2016. DRAFT 12 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Whether a person qualifies as an employee or an independent contractor depends on specific circumstances. See His masters’ voices. The decisive criteria are similar across the EU and generally apply to the employment law as well as to the tax/social security law assessment of the relationship. Surveys like this, and market commentary, consistently note that in addition to tax factors, autonomy, choice and flexibility are genuine motives for seeking nonemployed roles. Legislators who want better, more sustainable work, must not ignore this. Yet neither can they overlook the state of public finances. It is estimated that in the UK alone the gig economy costs the government £4 billion a year in lost revenue contributions and benefit costs (source: Trade Union Congress, February 2017). In the broader EU practice, which factors are more important and how to weigh the criteria differs significantly across areas of law and across borders. A common general rule is that the wording of the written agreement is not decisive. Performance and how arrangements are carried out in practice – i.e. real life – is to be considered. This ‘real life’ test poses issues for those who seek certainty in structuring relationships – it is not just a paper or online text. The biggest risk of engaging an independent contractor is that competent authorities – in retrospect – determine that the relationship should be qualified as an employment relationship. If someone is wrongly classified, the employer may be required to pay income tax and social insurance contributions. The timeframe for mandatory back payments differs from country to country but can be three years or more. In addition, there may be other demands for late interest and penalty payments, administrative fines – even criminal charges. These sanctions can be a disincentive to inward investors and senior managers who may be fixed with personal responsibility. In a different capacity, Uber executives in France have been subject to personal criminal proceedings. Talent thinks twice about disruption when the consequences can be traumatic. If a worker in the Netherlands is found to have been wrongly classified, back payments of income tax and social security contributions for up to five years will be due. And the Dutch Tax and Customs Administration can also impose a fine up to 100% of the payroll taxes due from the employer. In Hungary, a tax fine amounting to double the evaded amount can be imposed, above the obligation to pay the initial taxes and social security (and interest). Administrative fines are also applicable, the amount depending on the number of violations, their duration and the number of workers affected. In Austria, back payments for five years (social security) and up to ten years (tax) apply. In certain circumstances, administrative fines and criminal charges might be imposed. In the Czech Republic exceptional sanctions apply to both parties but risk lies most with the engager. The principal may be fined up to EUR 370,000 and the contractor up to EUR 3,700. The Slovakian labour inspectorate can impose administrative fines on the principal/employer of EUR 2,000 to EUR 200,000. 12|13 DRAFT 13 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future What am I? Given these sanctions, many desire the certainty of official approval. In only some countries a facility for this exists. There are no such approvals or checks available in Hungary, Slovakia and the Czech Republic. In Poland, binding approvals are possible with regard to tax and social security. However, an application might encourage the authorities to conduct an audit to check if the authority recommendation is observed in practice. In the Netherlands, there have been particular efforts from a tax angle to provide assurance on classification. Until May 2016 this could be done through the Declaration of Independent Contractor Status. These declarations were issued by the Dutch Tax and Customs Administration, based on forms filled out solely by the independent contractor. Having been handed the declaration, the principal was protected from withholding and paying payroll taxes. If, in retrospect, the declaration turned out to be wrongly issued, the consequences were borne by the contractor. This system led to a surprising number of individuals being taxed as self-employed, at no risk to their (possible) employer. So the Dutch government designed a pre-approval system to make both the independent contractor and the principal responsible for an incorrect categorisation. As of May 1 2016, the Assessment of Employment Relationships (Deregulation) Act was implemented. To have certainty on the classification, the parties must use an agreement pre-approved by the Dutch Tax and Customs Administration. The parties can choose to either let the Dutch Tax and Customs Administration assess their individual contract, or engage on the basis of a pre-approved template. Since an employer in the Netherlands is liable to deduct and transfer payroll tax, they are the first party called upon by the Dutch Tax and Customs Administration, if performance of the agreement in practice differs. In the UK, with a less strong culture of active officialdom, work is underway to use ‘RegTech’ solutions. The HMRC tax authority has launched an online status test to help consultants and principals see if their relationship enables them to meet it at arm’s length, or falls within IR35 tax rules. Anonymous tests are permitted, and HMRC promises to apply the determination given by the tool – as long as the data input matches the actual facts. But the UK’s tax system does not fully map onto its employment system – a person can be a ‘worker’ to have rights but remain self-employed for tax and social security. Levelling out this arbitrage will take some work, given how politicised taxation is in the UK. As in the Netherlands, pre-assessment of the relationship exists in Germany, although the assessment takes place from a social security perspective. By answering questions on a form and submitting the proposed agreement, the parties can ask the authorities to label a relationship an employment agreement or a contract for services. In practice, however, this system is not considered to add much value as the factual performance is decisive, despite the assessment. “The UK’s tax system does not fully map onto its employment system – a person can be a ‘worker’ to have rights but remain self-employed for tax and social security. Levelling out this arbitrage will take some work, given how politicised taxation is in the UK.” DRAFT 14 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future In Austria, the possibility to have a specific contractual relationship categorised by authorities is now under discussion. Currently (May 2017), only a non-binding request to the social insurance company is possible. However, a draft bill is due to be enacted as of 1 July 2017, according to the ambitious plan of the Austrian Federal Government. The aim is to provide legal certainty with a binding assessment of the social insurances, on condition that the provided information is correct and has not changed since the submission. In principle this is a welcome development for both employers/principals and employees/contractors in order to be safer with regard to the social insurance status. The draft bill is currently only in review phase, so changes still might occur, and the final version of the act and its application in practice will need to be assessed. The Taylor Review has considered a broader use for such a tool to give status indications for the three UK relationships – employee, worker, self-employed. Noting that the common law system takes longer to adapt analysis to new technology and legal constructs, it looked at a form of “wise men” panel to issue guidance on interpretation. This quest for certainty is fraught with difficulty, and could be argued to reduce the potential benefits of innovation: would Uber have carried so many passengers if it had been given an adverse determination on status three years ago? There are evolutionary arguments for the adversarial justice system. It permits different economic actors to make choices which help reach a balanced outcome and tests, issues and benefits which may otherwise go unseen if we rely on regulatory preapproval. Make me One thing a disrupter has to weigh up is the risk of failure. The threat of a reclassification of relationships typically becomes acute in connection with tax and social security audits and gathering revenue is a strong motive for the authorities. Since January 2016 it has been possible to submit agreements for approval by the Dutch Tax and Customs Administration. An initial evaluation in July 2016 shows that more than 92% of the assessed agreements are being rejected by the Dutch Tax and Customs Administration. Besides those alarming figures, there was also criticism of the system by both contractors and principals. Based on this dissatisfaction, the Dutch government decided to postpone the enforcement of the Assessment of Employment Relationships (Deregulation) Act until January 2018. In Poland, authorities tend to concentrate on blue collar workers when it comes to reclassification of contractual relationships and leave white collar employees alone, unless in high profile sectors such as banking, IT or direct selling. A consequence of reclassification (and sometimes its motive) is the applicability of mandatory labour law. “There are evolutionary arguments for the adversarial justice system. It permits different economic actors to make choices which help reach a balanced outcome and tests, issues and benefits which may otherwise go unseen if we rely on regulatory preapproval.” 14|15 DRAFT 15 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future In our experience so far, reevaluations have only rarely been triggered by contractors, the majority of such proceedings arising in the course of authority audits as already mentioned. Situations in which the risk of enforcement by the contractor is significantly increased arise at the end of the contract as well as changed personal circumstances of the contractor like illness or parenthood. This happened in the UK Pimlico Plumbers case, referred to in His masters’ voices and the Introduction, when self-employed Gary Smith had a heart attack and could not work minimum hours. Having been “let go”, he brought a case to establish worker status, with protection against disability discrimination. This reclassification could pose problems for him: he declared income as self-employed and in the last year of good health he declared trading expenses of £82,000 against income of £130,000. If he had to account for years of personal tax that could erode what he could win in compensation from the finding that, as a worker, he may have claims. Alongside regulatory and judicial scepticism about non-status, enforcement of status claims by unions is becoming more and more common in the Netherlands, since a growing number of sectors such as healthcare, ICT providers, delivery services, and other platform providers are using or replacing employees with independent contractors. An example are a number of proceedings, with different outcomes, conducted by several groups of employees, supported by trade unions, against postal delivery companies in the Netherlands. As in the UK, these are signs of a revival of union activity in these previously marginalised workforces. Developments: jeux avec frontières The basic issues around the status of contractors/employees and their respective characteristics are quite similar in many European countries. But the underlying economic conditions and legal environments still differ considerably. Conditions are not so uniform as to permit a harmonised policy. A short overview of developments and envisaged legal changes in the EU (without the UK) regarding approval and enforcement of status shows this. In the Netherlands, independent contractors and their principals do not fully know where they stand at May 2017, although we expect that the underlying idea of pre-approved agreements will largely survive the criticisms of the regime. As regards Austria, the fate of the draft bill regarding the pre-assessment of status and the final wording remains to be seen: but we think the idea will be enacted as there is a need to give certainty and help businesses plan. Elsewhere in the EU, these are signs of a common desire to balance rights with flexibility, and control an unregulated dive to the bottom of labour and tax costs. In Poland, contractors employed on a contract of mandate (a hybrid status between self-employed and employee) must be paid an hourly rate of at least PLN 13 (approximately EUR 3) gross since beginning of 2017 and they must report their working time on a monthly basis to the principal. The applicable rate is likely to be increased every year in January. In the Czech Republic, some changes are planned to the mechanism for paying social security by self-employed entrepreneurs, leading to a more transparent system. “The basic issues around the status of contractors/ employees and their respective characteristics are quite similar in many European countries. But the underlying economic conditions and legal environments still differ considerably.” DRAFT 16 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future In 2017, a tax-related initiative for small entrepreneurs (with an annual turnover of up to EUR 50,000) has been adopted in Slovakia, which makes the status of selfemployed contractor even more interesting from a tax perspective, and presumably will lead to an increased number of service agreements driven by the contractors. In Ukraine, there is a trend to tolerate questionable self-employment relationships given the tense economic situation; and legislation has been planned for years but has up to now not materialised. Under the current economic and political situation, a change in the near future is unlikely. Hence the EU determining in 2016 a two year period for assessment of the issues around lost tax revenue versus job creation across member states. Current proposals suggest it will be 2020 or beyond before the EU looks to consolidate a more consistent approach to establish a European platform on ‘undeclared work’ – years in which non-member states may seek to gain advantage. Bart Hunnekens, Eindhoven Wolfgang Kapek and Manuel Muellner, Vienna 16|PB DRAFT 17 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Competing in the new Europe: Industrie 4.0 / industrie du futur “Industrie 4.0 has, and will continue to have, enormous implications for employment status, both in France and Germany. Indeed, this new revolution requires modern work solutions.” French people often speak about ‘industrie du futur’ (industry of the future) whereas German people call it ‘Industrie 4.0’. Despite this difference in vocabulary, France and Germany are trying to work together on this topic. Conferences and meetings are organised by both politicians and major actors in industry, notably to deal with employment issues resulting from this fourth industrial revolution. Startups, the sharing economy, 3D printing, big data, the internet, smart manufacturing … all these evolutions are building the concept of Industrie 4.0, the shorthand for automation and data exchange in manufacturing technologies. Industrie 4.0 has, and will continue to have, enormous implications for employment status, both in France and Germany. Indeed, this new revolution requires modern work solutions. In 2015 the German Ministry of Labour and Social Affairs started a dialogue and raised questions on how current technology trends, social developments and changes in labour market may create a new working model or concept. This resulted in the White Paper – Work 4.0 Draft Discussion on 29 November 2016. The draft offers first responses to this development and conclusions drawn from the dialogue process. It has been read with interest by Matthew Taylor as part of his UK review, illustrating the cross-border influences of a ‘British solution’. The German concerns In general, future work will be more digital, more flexible and characterised by new forms of work and new working conditions. This so called Work 4.0 originates from Industrie 4.0, the fourth industrial revolution that focuses on digitalisation and the increasing importance of the Internet. According to the Ministry of Labour and Social Affairs, Work 4.0 influences various aspects of daily work. Complete new ways of accomplishing work (e.g. crowdworking) will develop, but the interaction of workers with robots will be a challenging area. Ideas about flexible working hours and places, and questions concerning the safety and environments of future workers will arise. DRAFT 18 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Technology is not the only factor changing our employment reality. Social preferences and values are shifting because of people’s life plans. Younger generations desire a better work-life balance and want to gain greater working sovereignty. The desire for more flexible working hours, by using working time accounts or similar instruments, is accompanied by the technical revolution in Industrie 4.0, such as mobile devices and broadband internet. These give employees the possibility of better coordinating family commitments and individual needs with their working lives. Thus digital transformation is experienced as new freedoms for many employees. In Germany, the question that arises from this development is how modern forms of work (especially flexible working hours and flexible places of work) can be introduced in compliance with existing German labour law, and not displace it. The German view is less radical than the concerns of some in the UK, but reforms are still possible within the requirements of binding EU Directives. In some respects, Germany’s attitude may correspond to the reduced take-up of online labour in core EU countries compared to elsewhere. As the graphic below shows, online work appears to have more market share in several countries like the US, Australia and UK than in aggregated EU states, including Germany. Which countries are buying online labour the most? 0 10 20 30 40 50 60 Chart 8: Which countries are buying online labour the most? US Canada other Americas United Kingdom other Europe Australia India other Asia and Oceania all Africa Source: Online labour index, 2016 18|19 DRAFT 19 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Time and space Industrie 4.0 impacts the workplace of modern workers. Some employees, including engineers, will be able to control and monitor machines, robots, production processes and the factory in general from home thanks to their connected devices. The working time of these employees cannot be monitored as in a traditional factory (where the clocking in system is often used). Consequently, the employees may perform a lot of overtime, in violation of health and safety rules on working time. For these reasons, a new French law obliges companies with more than 50 employees to negotiate with their relevant union in order to reach a collective agreement on the employees’ right to disconnect (droit à la déconnexion) and ways in which they can regulate the use of digital tools. However, this new law has been criticised by some as potentially limiting employee flexibility. The German Working Hours Act (Arbeitszeitgesetz) has explicit regulations concerning maximum working hours, rest periods and work on weekends and public holidays (only allowed in exceptional cases. Although Saturdays are regarded as working days, employers have to be very careful with accepting work that might have been done on weekends or public holidays). Employees may work a maximum of eight hours per day. This can be extended to ten hours per day provided that working hours do not on average exceed eight hours per day calculated over six calendar months or 24 weeks. This does not match just-in-time production and globalisation trends where performance is judged by results and not time spent. Where a project deadline is approaching, the work may still need to be finished urgently, even if an employee has already worked ten hours that day. A more flexible approach to fix this problem would be a provision for maximum weekly hours instead of maximum hours per day. This would still be in compliance with the EU’s Working Time Directive, which states that weekly working hours must not exceed 48 hours on average, including any overtime. As in France, email and digital tools affect rights on working time. For example, German workers are entitled to an uninterrupted period of at least eleven hours at the end of a working day. Keeping this in mind, receiving an email and answering it within one’s rest period may result in the period being interrupted and starting from scratch! Clearly, the rest period is intended for traditional employment relationships. The need for legislators to update this specific rule is obvious. Short interruptions such as these should not result in a new rest period for 11 hours. “receiving an email and answering it within one’s rest period may result in the period being interrupted and starting from scratch!” DRAFT 20 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future New jobs, new workplaces Digitalisation involves the evolution of numerous jobs and the creation of new ones, especially in digital, robotisation and data analysis. After years of the delocalisation of big companies, many are now beginning a relocation process that makes them more specific or direct in their customer positioning in the framework of Industrie 4.0. Digitalisation allows companies to produce better-personalised products for consumers, allowing them to be closer to their clients. Consequently, manual workers are metamorphosing into intellectual workers in France, which brings the need for qualified human resources. Such an evolution sometimes creates tensions between larger employers and small and medium-sized enterprises. Indeed, the latter have experienced difficulties in finding engineers. Faced with this problem, shared learning pathways (parcours partagés d’apprentissage) have been widely developed over recent years in the French aeronautic industry to offer new graduates the opportunity to first acquire experience within a big group, and then in a small or medium-sized enterprise. This allows them to choose the type of company for which they would prefer to work. Professional unions have already begun their reflection on these changes and the consequences of digitalisation, especially regarding new forms of work. As in the UK, thought needs to be given to how these shared pathways and plural forms of experience can adapt to worker voices. The idea of Work 4.0 can enable more employees (in theory) to choose their working place. The regulation of established concerns like home-offices is supplemented by the concept of agile working. Contractual agreements are necessary, since allowing agile working imposes obligations on the employer. For example, the German Occupational Health and Safety Act (Arbeitsschutzgesetz) requires employers to organise work so as to avoid as far as possible any risk to the life or health of the worker. In order to comply, businesses need a contractual right to access the property of those employees who want to work from home or elsewhere. It is not implied by law. Crowd working The possibilities of broadband internet and the growth of agile working have led to a whole new form by which work is accomplished. Services, ideas or content can be obtained from an online community, rather than from traditional employees. These individuals regard themselves as being free to choose when and where they work: they do not receive directives from their clients. This loose and non-binding form of cooperation raises questions about how to treat crowdworkers under German labour law, which defines an employee as someone who renders services to someone else and, by doing so, depends on him (persönliche Abhängigkeit). An individual integrated in an employer’s organisation and receiving instructions on place, time and the content of the work easily passes the test of dependency and is therefore an ‘employee’, with all the associated rights. In contrast, it is highly arguable that crowdworkers are not in an employment relationship, but are freelancers. As a result, every German law to protect employees (such as vacation entitlement, sick pay, and rules against unfair dismissal) is inapplicable. “Digitalisation allows companies to produce better-personalised products for consumers, allowing them to be closer to their clients.” 20|21 DRAFT 21 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Besides the idea of status, the idea of crowdworking raises problems for another central concept in German employment law: the idea of an establishment. Various protection laws are based on this term, which goes back to the famous German scholar Alfred Hueck. An establishment requires some form of common structure of employees, means of production and leadership – which crowdsourcing usually lacks. Although it is not required that employees work together on one single site, at least some sort of organisational connection between means of production, employees and leadership is needed. This organisational connection is often seemingly absent in the case of crowdworking. For conventional businesses it may be most welcome if legislators react to these developments by establishing new laws to cover forms of work outside employment law protection, to avoid a distortion in competition. Co-determination and oversight The French legal and conventional industry framework is founded on the principle that the employee is entitled to a private life, even at work. However, with the development of Industrie 4.0, there are risks that technical innovations lead to an automatic verification of the work performed by the employee (with GPS, assistant cameras, robots, connected captors and so on) and that the employee would no longer have a private life in their workplace. Consequently, the employer would be able to record each task accomplished by the employee and determine whether they duly comply with the process put in place and whether they are efficient. The data collected on employees (which may not be anonymous) could be analysed by AI programs to evaluate the employee’s efficiency. It would be possible that an employer would decide to dismiss an employee (for underperformance, for example) on the basis of these technologies with limited human intervention. This is why it seems to be more and more important for innovative French companies, in order to avoid conflicts with their employees, to put in place regulations and negotiated agreements with employees and staff representatives regarding the proper use of these digital tools such as computers, smartphones, robots and connected devices. For example, as in Germany, a negotiation could define the conditions under which staff representatives would be entitled to check the company’s database in order to analyse the way it is used. The internet plays a crucial role in Work 4.0. Amazon’s Mechanical Turk, for example, looks to the outsider like a machine. As the company wrote in its 2005 SEC filing, Mechanical Turk provides a way for computers to “integrate a network of humans directly into their processes”. The internet is not just a way to bid for work, or its means of delivery. Representing one’s company on social media is a key element of gaining attention for your product, recruiting high-profile employees and building a brand. DRAFT 22 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future German law (the Betriebsverfassungsgesetz – BetrVG) requires any employer wanting to implement technology which is capable of being used to monitor the performance or behaviour of its employees to first negotiate with, and obtain the agreement of, the works council (a process known as co-determination). In December 2016, the German Federal Labour Court (Bundesarbeitsgericht) ruled that this extends to where the employer’s Facebook page allows customers or users to post comments that are related to the behaviour and performance of the employees. The decision is of great significance for companies with existing work councils in Germany that have an online commenting function for users. The works council was of the opinion that an employer could be looking for employee misbehaviour by looking through the Facebook comments. This argument was partly successful before the court. The judges ruled that only the employer’s decision to directly publish posts on its Facebook page is subject to co-determination, since posts that refer to the behaviour or performance of employees constitute a monitoring of the conduct or performance of the employees within the meaning of the law. Any comment which allows evaluation of the behaviour or performance of an employee is equivalent to monitoring employees using a technical device. To be on the safe side, companies with existing work councils and social media pages which provide direct commenting should temporarily disable this function until they have co-ordinated the use of these functions with their works council. Conclusion: inclusion The success of Industrie 4.0 will undoubtedly be linked to the ability to adopt new rules allowing and reinforcing modern work solutions while negotiating employees’ protection of their fundamental rights or existing interests. How far it can do this, while enabling the inclusion of more people, remains to be seen. “In the longer term employers automate work. Where employees are still used, firms become more selective, going for older, more experienced workers – implicitly discriminating against women, younger workers and some ethnic groups. Unsurprisingly France, with absurdly generous employee rights for ‘insiders’, has lower female employment than the UK, and massive youth and minority unemployment” Opinion: Professor Len Shackleton, City A.M. Newspaper 22 March 2017. Agree or disagree, it is striking how, in both France and Germany, a negotiated solution is seen as needed between businesses and their existing works councils or industry bodies. Can workplace discussion fix the issues where existing legal forms are rigid or slow to do so? It is harder to do this where atypical working or fragmented employment models are already in place. What works for France and Germany may not work for the UK. Marc Gimmy, Munich, and Claudia Jonath, Paris 22|PB DRAFT 23 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Benefit gig: New relationships, new benefits, new model UK financial services “Most people in the UK are managing their financial affairs well on a day to day basis, far fewer are preparing well for significant life events.” In the United Kingdom, there is an increasing need for individuals to take greater responsibility for their own financial future. Financial wellbeing and inclusion However, due to the perceived ‘advice gap’ the majority of UK citizens find themselves having to make many important financial decisions with no or limited guidance. They need help. Can it be given by businesses they work for without an undue cost? In evidence to a parliamentary committee ahead of the UK’s much anticipated gig economy reform programme, both Uber and Deliveroo said they would be interested to provide benefits for committed colleagues. But they are fearful that doing so could convert freelancers to workers – or workers to employees. The UK government-backed Money Advice Service (MAS) found that whilst most people in the UK are managing their financial affairs well on a day to day basis, far fewer are preparing well for significant life events. Composite measures by household income Chart 5: Composite measures by household income 54% 60% 71% 28% 44% 59% Source: Money Advice Service's UK Adult Financial Capability Survey, 2015 0 10 20 30 40 50 60 70 80 Managing money well day to day Plan for and manage life events Low (less than £17.5k) Medium (£17.5k to £50k) High (Over £50k) Annual household income Source: Money Advice Service, UK Adult Financial Capability Survey, 2015. DRAFT 24 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future 46% of those aged 65-69 feel their employers should provide information about the state pension 31% of 22-29 year olds think their employers should provide web based tools or calculators 37% of those aged 18-21 feel their employers should provide information about how to budget for retirement, more than any other age group How to budget for retirement 0 10 20 30 40 50 Lists of where to get more information about retirement planning 0 10 20 30 40 50 Web based tools or calculators 0 10 20 30 40 50 Source: Scottish Widows Limited, 2016 18-21 22-29 30-39 40-49 50-59 60-64 64-69 70-74 75+ Source: Scottish Widows Limited, 2016 18-21 22-29 30-39 40-49 50-59 60-64 64-69 70-74 75+ Source: Scottish Widows Limited, 2016 18-21 22-29 30-39 40-49 50-59 60-64 64-69 70-74 75+ 23% 31% 28% 25% 22% 21% 13% 8% What is the advice gap? FAMR defines the ‘advice gap’ as “situations in which consumers are unable to get advice and guidance on a need they have at a price they are willing to pay”. FAMR was launched to address the perceived ‘advice gap’ resulting from the UK Retail Distribution Review that was launched in 2006. This aimed to fundamentally change the way retail investment products were distributed to UK retail consumers by eliminating ‘commission bias’, i.e. moving away from advice via commission to paying adviser fees. However, this change has in part led to the majority of the UK adult population being unable to afford financial advice. As conventional employment models erode, this tendency is likely to strengthen. What is financial capability? In its 2015 survey, MAS defined financial capability as: “ … a person’s ability to manage money well, both day to day and through significant life events, and to handle periods of financial difficulty. It is driven by personal skills, knowledge, attitudes and motivations, and made possible by an inclusive financial system and supportive social environment. Financial capability helps people achieve the best possible financial wellbeing.” In response to this, the UK government is promoting the important role that businesses can have in providing their staff with help. This policy objective is outlined in the Final Report on the Financial Advice Market Review (FAMR) that was published in 2016 by HM Treasury and the Financial Conduct Authority (FCA). At this time, the initiative is focussed on conventional employment models. Given the high number of marginalised (older, younger, female) workers in the gig economy, we think the FAMR initiative should also look beyond the traditional workplace and engage with gig platforms to develop opportunities for their workers to access financial wellbeing solutions. Proportion of employees who expect that employers should offer access to web-based tools or calculators, according to age Source: Workplace pensions report 2016, Scottish Windows Limited 24|25 DRAFT 25 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future The importance of financial wellbeing in earnest A range of factors, such as the most depressed wages since the global financial crisis, rising housing and education costs, and the challenges in building up satisfactory pensions pots are affecting the financial wellbeing of millions of workers. Poor financial wellbeing can have negative consequences for health in terms of poor psychological wellbeing and higher anxiety and stress levels. Research from the Institute of Employment Studies (IES) indicates that this in turn impacts economic productivity through poor job performance, reduced concentration, and absenteeism. A recent survey of 10,000 UK workers by alternative finance provider, Neyber identified that: X 70% of the UK workforce admit to wasting a fifth of their time at work worrying about their finances, costing the UK economy £120.7billion a year; and X at least 17.5million hours are lost per year as a result of workers taking time off work due to financial stress. The Taylor Review is considering ways of promoting better (healthier, happier, more autonomous) forms of work. The FCA is also alive to this issue, and in March 2017 as part of its Project Innovate RegTech initiative held a TechSprint competition to challenge participating teams to develop technology tools and concepts to help break the link between financial difficulty and mental health problems, see the role of technology. Financial wellbeing – a role for the business? FAMR recognised that automatic pension enrolment, together with widespread workplace pensions, mean that employers are becoming an obvious point of contact for employees seeking help as they approach retirement. This applies to those who engage workers as much as conventional employees, as the auto-enrolment rules apply to them. FAMR believes that the workplace presents an opportunity to address the ‘advice gap’ and its findings are that consumer demand for access to advice through the workplace is strong. This position is supported by research published in January 2017 by the IES and the Chartered Institute of Personnel and Development (CIPD) which shows the need for employers to take action to support their employees’ financial wellbeing and offer staff access and information on sources of advice to make good financial choices. IES/CIPD has published practical guidance for employers Source: Financial Well-being in the Workplace: A Way Forward Prepared by the Financial Advice Working Group for HM Treasury and the Financial Conduct Authority (Final report, March 2017). 1 in 4 workers say they have lost sleep over money worries SMF, 2016 89% of employees agreed that nancial concerns have an impact on employees’ workplace performance FCA, 2017 46% say nancial pressure aects relationships with manager Neyber, 2016 59% of employees with ‘current’ nancial worries state money concerns prevent them from performing their best at work Willis Towers Watson, 2016 8% of employees have spent time during the working day dealing with money problems CIPD, 2017 4% to payroll costs for UK irms Barclays, 2014 Absenteeism and presenteeism from nancial distress is adding and extra £121 billion Neyber, 2016 Each year, nancial stress costs the UK economy DRAFT 26 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future “ … many businesses that wish to be more collaborative are, anecdotally, fearful of being so least it change their status and impose more obligations – a ‘vicious virtuous circle’.” that maps out key steps along the journey for businesses to help their employees make better financial decisions, and outlines the benefits for organisations and employees alike. In April 2017, FAMR’s Financial Advice Working Group also published (after consultation with employees, employees, MAS, FCA representatives and consumer-facing groups) its final report for consideration by HM Treasury and the FCA. The proposals include a web-based portal offering employers useful information to help employees manage their money, and a simple guide to give to employees containing valuable tips and tools. The UK regulatory position FAMR identified that concerns about regulation and potential liability often deter some employers from offering financial support to their staff. That applies to financial advice regulations and to employee or worker status. Only FCA regulated and authorised firms and individuals are permitted to offer advice on financial services products. Employers can provide access to financial advice for their employees without needing to be authorised by the FCA provided that the employer is not in the business of providing investment advice and does not receive any commercial benefit for helping its employees. It is not clear how far this can extend to workers (or the self-employed) and many businesses that wish to be more collaborative are, anecdotally, fearful of being so least it change their status and impose more obligations – a “vicious virtuous circle”. In April 2017, the FCA published a draft employer factsheet that sets out what help employers can provide on financial matters to their employees without being subject to regulation. The FCA expects this guidance, following consultation, to take effect from January 2018. We would be excited if this is expanded to include new work models and the people who work with them. The role of technology 26|27 DRAFT 27 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future FAMR recommends taking steps to ensure new financial technologies (FinTech) can be exploited to drive down the costs of supplying advice, making it affordable for more consumers. There is a growth in FinTech service providers offering financial planning tools to organisations to incorporate into their benefits packages. Examples of such FinTech firms operational in the UK market include: X Squirrel Financial Wellbeing: which enables employees to opt to have a percentage of their pay paid into a ‘Squirrel account’ to help them meet their personal budgets and financial goals. X Care.com: a ‘peer to peer’ platform so that families and pet owners who engage care-givers can ‘tip’ them with funding for benefits via pre-paid debit cards humanising the tech process with systemic gathering of activities. X Neyber: a financial wellbeing company, works directly with employers to offer affordable borrowing to employees, directly from their salaries. X MoneyFarm: a robo-adviser, has recently partnered with taxi-app Uber, to enable its partner-drivers access to pension and ISA products (partly with a view to avoid Uber being treated as an ‘employer’). Taylor Wessing anticipates a steady increase in financial wellbeing solutions like this becoming available over the next five years. In particular, the UK Open Banking Working Group (a collective of banking, open data and FinTech professionals) is in the process of developing an Open Banking Standard, which intends to make it possible to share data that banks have historically held, by means of open application programming interface. This could in time revolutionise the way we manage our money widening access for consumers to existing products, like credit, debt advice and financial advice through personal financial management platforms. The scope to extend this to employers and gig platforms (which do not employ) is large. Given the clear UK policy drive towards enhancing employee or worker financial wellbeing, and the policy momentum towards a cashless economy, there will likely be role for such FinTech providers in filling the advice gap and, in doing so, helping model a new way of providing benefits without changing the legal status of staff. Workers and saving for retirement As life expectancy continues to rise, people are faced with having to work for longer and save more for their retirement. This is at a time when many employers in the UK are reducing the provision they make for employees (having historically rarely made any for workers) on retirement. The golden age of defined benefit pension schemes is over, with the risk of ensuring proper saving for retirement having transferred to the worker. In an effort to address the risk of people reaching their old age without “This could in time revolutionise the way we manage our money, widening access for consumers to existing products, like credit, debt advice and financial advice.” DRAFT 28 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future adequate retirement savings and then falling back on the state, the UK government has recently made changes in four broad areas: X getting people into a retirement savings arrangement; X incentivising them to stay there; X guidance and advice to those in schemes about how to save for retirement and what to do with their savings; and X increasing flexibility as to how benefits may be taken in retirement. Getting people into retirement savings arrangements Over the past five years, obligations have been phased in for employers to automatically enrol workers into a pension scheme, subject to certain minimum earnings requirements. Whilst workers can then opt out, the UK government has used the indifference that many people show towards retirement savings to its advantage, meaning that once in a scheme, people are likely to stay in. This has been successful, with the Pensions Regulator reporting (April 2017) that more than 7.6 million people had been automatically enrolled into a pension scheme. This law applies to workers and not just conventional employees – but mainstream employment has provided the greatest take up. The next step is getting the gig economy workers into a pension scheme. The recent rulings in various cases about these workers – see the Introduction – effectively give them pensions auto enrolment rights too, although there are significant payroll and other challenges in actually delivering those rights. Also, the government has been seeking to broaden the ways of saving for retirement. There have always been alternatives to a pension scheme. Some people treat their home as their pension, expecting it to grow in value, which can be released when ‘down-sizing’ on retirement. This remains an option, but for many the cost of joining the housing market is prohibitive. The government has combined the need for encouraging people to save for their retirement with the need for help in getting on the property ladder through its new Lifetime ISA or ‘LISA’ arrangements. LISAs will be available as from the tax year 2017-18 and enable tax efficient savings to be built up that can be used either for retirement purposes or for buying a first home. LISAs will be available only to those under 40. A major challenge remains the treatment of lower earners and their access to any benefits, and the self-employed. Unfortunately, the issue is heavily intertwined with tax policy and controversy over electoral pledges. This raises all sorts of issues for inter-generational fairness. It is the rather large cloud that accompanies the silver lining of modern, flexible working arrangements that see people no longer having a ‘job for life’ and increasingly selling their services in very different ways. 28|29 DRAFT 29 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Witness the March 2017 U-turn of the UK’s Chancellor over the proposed reform to the social security contributions of the selfemployed. Stymied by a previous administration’s ‘promise’, and unable to flex in the light of a challenging post-Brexit tax-base, the experience shows how complex the delivery of technocratic solutions is. Human reactions get in the way, but a new UK government might not feel bound by a previous policy commitment. As the Association of Consulting Actuaries identify in their recent government submission, the payment function of online platforms is easily adapted to permit – or require – that contributions can come directly from them. Using technology, administration can be cheaper, and quid pro quos must be available in the form of regulatory dispensation or tax allowances. But again, this would require political will, and skill. Incentivising people to stay in Traditionally, people have been incentivised to save in a pension scheme through provision of generous tax relief. There have been numerous mutterings about the UK government removing the ability for pension scheme members to take a lump sum equal to 25% of their savings tax-free on retirement, or for the tax relief granted on contributions paid in to be reduced. But the government has not (yet) taken either step. What it has done instead is to target higher earners. It has reduced the amount of retirement savings that can be built up tax free, both over the lifetime of an employee and year-on-year. Guidance and advice Over recent years, the UK government has increased the availability of retirement savings guidance and the occasions on which advice must be taken. Educating people about the importance of pension savings and how best to use them in retirement is fundamental to ensuring more engagement with this issue. In 2015, the government introduced ‘Pension Wise’. This is a guidance service – currently being delivered through The Pensions Advisory Service and Citizens Advice – available to those approaching retirement, to provide guidance about how people use their retirement savings. In addition, there are increased obligations on providers of personal pension arrangements to give clear information and appropriate risk warnings about options for how benefits are taken on retirement. Similar requirements have been imposed on trustees of occupational pension schemes. “Using technology, administration can be cheaper, and quid pro quos must be available in the form of regulatory dispensation or tax allowances.” DRAFT 30 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Guidance is not a substitute for tailored individual advice and is only a starting point. In recognition of this, regulations introduced in April 2017 allow individuals to use £500 of their pension savings to seek retirement financial advice. They may do so once a year for three years. Individuals with pension savings worth £30,000 or more in a defined benefit scheme must take financial advice before transferring their benefits to a defined contribution scheme, which more and more employees have been looking to do, to take advantage of the benefit flexibilities described below. Similarly, employers must now pay for their employees to receive independent financial advice, if they are encouraging them to transfer the defined benefit pension savings to a defined contribution scheme. But this does not, by definition, apply to the self-employed or workers. Benefit flexibility For those who have savings, the UK government has increased flexibility in how members of a defined contribution pension scheme may use them to take benefits in retirement. April 2015 saw the introduction of the so-called ‘pension freedoms’. The laws allow members of defined contribution pension schemes to take their retirement savings much more flexibly, including by taking all of them as one lump sum, or in a series of lump sums over time, albeit still with only 25% payable tax free. This prompted the now infamous comment from the Pensions Minister at the time, Steve Webb, about a generation of retirees cashing-in their pension to buy Lamborghinis. How times change: perhaps in 2018 the investment would be in driverless cars? The freedoms were seen as a challenge to the insurance market and the cost of buying annuities, which were previously the main way of delivering an income in retirement. There has been flexibility in the annuity market, too, with increasingly tailored solutions becoming available, particularly for those who have health issues. The rise of medically underwritten annuities has been one of the features of the market over the past few years. The FCA has recently reviewed providers to see whether they are making members of pension schemes sufficiently aware of this option, so that those who want to take an annuity can get the best value for it. Not all the proposals have been implemented. A planned secondary annuity market, that would have seen those who had already bought annuities be able to sell them back, has been abandoned. There is a lot of scope for further reform, if the intersections of tax, social security, financial regulatory and employment law policies can be negotiated. If … Peter Wilson and Mark Smith, London “There is a lot of scope for further reform, if the intersections of tax, social security, financial regulatory and employment law policies can be negotiated. If … ” 30|PB DRAFT 31 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Special agencies: Recruitment and flexibility in Germany and the UK “The ‘aggregating’ function helps reduce transaction costs of sourcing workers and work – much as the new online platforms can now do. Agencies increasingly hold themselves out as experienced, professional and ethical alternatives to the practices of some disrupters. But they are under political pressure arising from concerns over exploitation.” Recruitment agencies support companies in the search for qualified personnel. Such personnel usually need specific skills and experience to help companies which are often interested in meeting their workforce requirements in a flexible manner. The rise of agencies: a common trend Recruitment agencies can help to flexibly meet the demand for personnel. If workforce bottlenecks occur over the short or longer term, an agency can quickly provide qualified workers without engaging in a long-term individual relationship. Take, for example, a major new order at a time when commensurate labour capacities are unavailable. In such a case, an agency can fill vacancies with specialists at short notice, while costs are transparent and plannable. The skilled personnel deployed will remain with the customer only for as long as required. Importantly, the lead time is short because the customer need not advertise jobs or conduct time-consuming recruitment procedures; what is more, the customer does not run the increasing risks connected with such procedures, such as compliance in Germany with the provisions of the German General Equal Treatment Act (AGG). The ‘aggregating’ function helps reduce transaction costs of sourcing workers and work – much as the new online platforms can now do. Agencies increasingly hold themselves out as experienced, professional and ethical alternatives to the practices of some disrupters. But they are under political pressure arising from concerns over exploitation, as we discuss below. In practice, three ways of legally implementing the flexible deployment of professional staff at companies through recruitment agencies have been established. agencies may hire out their own specialised employees to third parties. it is possible to deploy professional staff on the customer’s premises as freelancers. (and sometimes in combination): recruitment agencies search for highly qualified permanent personnel for their customer against the payment of a placement fee. The option of permanent placement is not covered in the following, as we focus on flexible deployment of specialist workers by recruitment agencies. 1 2 3 DRAFT 32 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future The first option is realised by concluding a labour leasing contract between the recruitment agency and the customer. The agency undertakes, upon request, to lend to the customer’s establishment personnel for the purpose of temporary employment. The agency guarantees to the customer that only workers employed by the agency will be posted. The customer pays a labour leasing fee or under a ‘contractor’ model, the recruitment agency concludes with the customer a contract for the provision of services and undertakes to deploy for this purpose a qualified freelancer/subcontractor. Based on another contract, the agency will then commission a freelancer as its subcontractor for providing the services agreed between the agency and the customer. The second option – deployment of freelancers on the customer’s premises – typically requires an advance examination as to whether the individual qualifies for such activities. Compliance checks must be performed prior to deployment. The deployment of a freelancer should be clearly structured upfront, together with the customer, in order to minimise any risks. This is of special importance where the freelancer will be involved in a project together with customer employees, using company equipment (such as computers, etc.) and working under instructions. Experience has shown that, where regulatory pre-approval is not possible, (see Border control) the best approach is to determine status from the outset, using comprehensive checklists and up to date case law analysis. This requires an overall analysis of all material circumstances. The more the worker is subject to instructions about the content, place and time of service provision, and the more the worker is involved in the customer‘s work processes and operations, the more one has to assume − taking into account all circumstances of the individual case − that disguised employment exists. Working for the clampdown: pressure on service companies The contractor model bears the risk that it may turn out, even after years of contract performance, that an employment rather than a freelance relationship is involved. In such a case the employer is obliged to pay to the relevant authorities the full social security contribution (both the employer’s and the employee’s share) from the outset and also runs a risk of criminal prosecution. “Whosoever, as an employer, withholds contributions of an employee to the social security system shall be liable to imprisonment not exceeding five years or a fine.” (Sec. 266a (1) German Criminal Code [StGB].) The risks are considerable. And on 1 April 2017, the reformed German Personnel Leasing Act (AÜG) took effect. Under the new AÜG, temporary work has become more complex and less flexible. The revised AÜG provisions stipulate that in such situations an employment relationship with the customer’s company is established by law. The contractor model has the advantage that it offers good margins and is financially more attractive than the temporary employment model. The new German AÜG contains ‘anti-avoidance’ terms so that, for example, the worker’s name must be specified by referring to the labour leasing contract, requiring written form. Notional positions are no longer permitted. Any violation of this provision is punishable by a fine of up to EUR 30,000. If a labour leasing contract is falsely declared as a contract for 1 2 32|33 DRAFT 33 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future work or services (rather than an employment relationship), obtaining a labour leasing permit will not prevent the imposition of sanctions under the AÜG for illegal labour leasing. The protective effect of a permit will in future materialise only where the parties expressly designate their contractual relationship as temporary employment. This is new and increases the risk faced when using the contractor model. In Germany as in the UK, to reduce the risk of disguised employment for the customer, the formation of a personal service company may be advisable. In that case the customer would conclude the freelance contract not with the freelancer, but with the freelancer’s company, which would then post its shareholder/managing director for performing its contractual duties on the customer’s premises. But the Federal Court of Justice has said that this may in certain circumstances constitute circumvention of the law and stated that any assessment as to an employment relationship needs to be based solely on the factual circumstances rather than on a legal form obviously chosen for the purpose of concealment. A different legal view is certainly conceivable, but as in both the UK and Germany, the use of personal service companies is under pressure. Recent UK changes require state clients of such companies to determine their status and make tax and social security withholdings on payments to them as if the owner of the personal service company were their direct employee. Contractors lose a tax-offset but do not gain extra legal rights. Regulating the role of agencies: hard law versus nudge theory Regarding option one, classic temporary work by way of a labour leasing contract between a recruitment agency and its customer, workers in Germany can now only be deployed for a duration up to the statutory maximum labour leasing period (18 months) or up to the limit provided for by any deviating provisions in the relevant industry collective labour agreement or works agreement at the customer’s establishment. During engagement, the agency as the lessor must grant the same material terms and conditions applicable to a comparable employee of the customer at the customer’s establishment, including equal pay. A collective labour agreement can include deviating provisions, but only for the first nine months of temporary work: a longer period is possible only through qualified collective agreements such as sector-specific pay supplement agreements. Again, this makes temporary work more inflexible then before. Germany’s worker representation culture permits negotiations to deal with ‘non-core’ workers, and dynamic unions like IG Metall seek to extend the protections of core worker collective agreements to the peripheral agency labour force in sectors like logistics. As we comment on in Border control, German law and practice can work to normalise and contain the impact of agencies. By contrast, the UK currently has no real culture of ‘umbrella’ representation covering sites with multiple employees. We wait to see if the Taylor Review promotes some form of works council for fragmented workforces. It could advocate that agency staff have a voice in multi-employer sites, e.g. at fulfilment centres or contact centres. If it does, will UK core workforces be ‘altruistic’ or self-interested in supporting common treatment for agency workers? “A different legal view is certainly conceivable, but as in both the UK and Germany, the use of personal service companies is under pressure.” DRAFT 34 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Another possible reform to UK practice which has been under discussion would be a requirement for client businesses to publish information on their use of agency staff. This would be consistent with UK policy under Prime Minister Theresa May, whose laws on modern slavery and gender pay gaps require transparency. But it is not easy to see how, on its own, a requirement to declare use of agency workers would influence the customers of a business, or the business in its own conduct. Stronger outcomes could come from a law making the enduser liable for any breach of obligations to agency staff. Agencies and Brexit Britain’s exit from the European Union has many potential effects on the cross-border aspects of agency law and the international deployment of workers. Fundamentally, unless a special deal is reached, Brexit does away with the free movement of workers, as Britons will lose their status as EU citizens when the UK leaves the European Union. Britons will no longer be covered by the scope of Germany‘s Act on the General Freedom of Movement for EU Citizens (FreizügG/EU) adopted to implement Directive 2004/38/EC. So recruitment agencies face delays and increased qualification requirements when wanting to post workers into the EU and vice versa. In the future, for any employment in the relevant other country, German and British workers will need work visas, the timing or achievability of which would be problematic or even impossible for many candidates. Among other consequences, Brexit will impact tax regulations for recruitment agencies not having their own subsidiaries or independent establishments in Germany. A customs union between the UK and the EU is rather unlikely and customs barriers are expected to be reestablished. More fundamentally, the EU rules on agency work have for a long time been criticised by some politicians for restricting choice and flexibility. As EU rules harden, will the UK be tempted to move the opposite way to differentiate itself and increase competition through a different approach to agency work – and can it afford the implications for tax revenue? Dr. Sebastian Buder, Berlin “Britain’s exit from the European Union has many potential effects on the crossborder aspects of agency law and the international deployment of workers.” 34|PB DRAFT 35 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Conclusion: Can we do better? “Seeing things as they are, calling it like it is and finding a nuanced way forward will be important to a sustainable and profitable workplace.” Modern work is changing. It is interwoven with complex issues of generational equity, demographic change, automation and artificial intelligence, tax policy, migration and international relations. The issues are complex and more subtle than the ‘either/or’ binary characterisations of many reports. Some research reports that falls in Eurozone unemployment over the three years to 2017 are underpinned by jobs of ‘deteriorating quality’. This refers to part-time, temporary and other non-standard forms of work. But other reports show that these roles are not necessarily worse, even if they are atypical. Quality is juxtaposed with quantity, and the policy challenge is to try to have both. Seeing things as they are, calling it like it is and finding a nuanced way forward will be important to a sustainable and profitable workplace. In a UK parliamentary report released in May 2017, the need for clarity is laid bare: “Designating workers as self-employed because their contract offers none of the benefits of employment puts cart before horse. It is clear, though, that this logic has taken hold, enabling companies to propagate a myth of self-employment. This myth frequently fails to stand up in court, but individuals face huge risks in challenging their employment status in that way. Conversely, where there are tax advantages to both workers and businesses in opting for a self-employed contractor arrangement, there is little to stand in the way. It is clear that current ways of categorising workers are creaking under the weight of the changing economy”. Source: UK House of Commons Work and Pensions Committee May 2017 DRAFT 36 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Save the humans It is all too easy to characterise new technologies and work models as some kind of vampire squid on the face of humanity. But there are equal possibilities of a benign, barrier reef ecology. Even if studies like the ‘Good Gig’ report by the Royal Society of Arts show that women and ethnic minorities are under-represented in gig jobs, nevertheless the scope for greater workplace inclusion across ages and other demographics is there. The fact that platforms can enable access to “hard to be hired” populations is evident in the reaction of some regulated trades to their encroachment. And (including in this report) there are sketches of how new technologies could be used to provide benefits cost-effectively and on a scale that can fit the changing world of work. See also Uber UK’s promotion of a ‘pooling’ benefit for its drivers to self-insure against ill health. It is wrong to caricature the approaches of new business in the world of work. Even if there are significant tax or regulatory incentives for them to take a stance that they do not have an enduring relationship with their workers, we can also see them recognising the need for workers to have some say, and access to some form of justice. Whether this occurs in cultures with a history of collective dialogue, as in Germany, or in Anglo-Saxon systems that go some way to replicate dispute models through whistleblower and other appeal bodies – Hermes, Uber – we can see that access to justice, as with benefits, may need to be wired into the operating model in order for it to grow and thrive. It is just a part of good business. Across developed economies, we see a pattern of convergence between disruptive work models and the ‘mainstream’ economy. This is not to say that disrupters are being reeled back in, but the responses demonstrate the relevance of legal models and a desire or need to adapt to them. Nudge, nudge Lawsuits and negotiations are one form of response to the friction of change. Political adjustment is another. As attitudes to work, migration and tax become a focus of election and post-election campaigning in developed economies, the UK is first up for a concerted national response to the problems of modern work. When a new Prime Minister walks into her or his office in the second week of June 2017, one of the first things on their desk will be the Taylor Review whose terms of reference, applicable to platform and mainstream businesses, include: X how emerging practices relate to flexibility, benefits and labour market participation; X the balance of rights and responsibilities, and how non-standard employment affects legal rights; X learning from alternative forms of representation internationally; and X supporting a diverse ecology of business models. “We need to bring more humanity to the way we interact with drivers.” Source: Uber Chief Human Resources Officer, 27 March 2017 quoted in the New York Times. 36|37 DRAFT 37 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future These preoccupations are shared across the world. Compare them with some themes from the European Commission’s April 2017 proposals for a new Social Pillar, ultimately planned to find its way into EU law, including: X equal opportunities and access to the labour market; X secure and adaptable employment; and X social dialogue and involvement of workers. Much specific work has been done in the UK and at a key inflexion point in policy formulation, if only as a reference point for future reforms we risk some predictions on the behavioural and legislative measures that the UK’s Review may include: Issue Prospects Comment Status and substantive work rights Abolish ‘worker’ status, so only two categories This seems very unlikely. Unions and some professional organisations have canvassed the removal of the ‘third way’ in consultation with law makers. It seems unlikely that there will be a recommendation that policy should ‘level up’ workers so that they are full employees. Extend employment rights to workers The biggest differences between workers and employees are rights to claim unfair dismissal, but this only kicks in after two years’ service, and then rights to family leave and sick pay. Some of these relate to benefits provided by the State. Resolving this is unlikely without recommendations on tax/social security, and the Review is only likely to recommend a ‘direction of travel’. Permit benefits without changing status Allowing businesses to provide training – skills, market re-integration for maternity returners and so on – seems desirable in policy terms and if it benefits them and workers, it is easy to see why providing these (and other) benefits should be allowed without it meaning additional incremental rights and costs in changing from worker to employee status. Simplify test of worker status Many have said this is desirable: one way to do it would be to refer to the primacy of ‘control’ above other considerations. Zero-hours contracts: higher pay for non-core hours A hot political topic in the UK, but requiring differential pay rates for non-core hours would be complex to administer, and so unlikely. Laws already limit the ability of business to insist on zero hours contracts. Clarity and communications Relabelled category – ‘dependent contractor’? Using the word ‘worker’ feels old fashioned, and is confusing because it has a general and a technical sense. Online status tool and resources A status tool in itself is likely to be indicative not determinative but the availability of other information and access points to guide individuals and businesses would be welcome. Key: Materially unlikely Possible Quite likely Probable DRAFT Very likely 38 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Issue Prospects Comment Presumption of worker status Some politicians and unions have advocated this. It would make self-employment a specific case to be demonstrated by individuals or businesses. The presumption would generate greater clarity for business planning but not achieve certainty. Require written statement of worker rights Currently this is only required for employees after a period of service. Requiring it to be provided to workers could help avoid disputes, at marginal cost. It is hard to argue against. Required stakeholder reporting of worker agency use This could look something like requiring larger companies to report how often, perhaps why and which agencies are used. It would align with other government approaches to reporting on gender pay and modern slavery. It is not clear how it would influence behaviour. Enforcement Gangmasters’ Licensing Authority role enhanced Some form of central agency enhancement is likely to be needed, and the Authority has been involved in the Review. In the longer term, more activity from other regulators – tax and pensions particularly – may be needed. New mis-labelling sanctions To reduce scope for abuses and discourage mislabelling of status, unions have been advocating sanctions – potentially criminal fines – for ‘deceptive’ wording. Legal claims: reduced tribunal fees This is a crucial intersection with other policy. Tribunal fees have been increased with a view to forcing parties into non-litigious modes of settling, and it may be too big a U-turn to reduce fees. Legal claims: fast-track resolution Potentially, if coupled with a speedier fast track to hear low value but high significance cases around status, this could be achieved. End-user liability for supply chain Where agencies become insolvent, or workers are not paid holiday pay/other minimum rights, it is attractive to fix liability on the ultimate beneficiary of work. It could be a useful anti-avoidance mechanism, but may be too controversial. Dialogue and inclusion Workplace council for larger sites In logistics, hospitality, leisure and care industries it is common to have multi-employer workforces who might have a common interest at a site but who are too fragmented to be entitled to information/consultation. Expect some form of encouragement for social dialogue. Requirement to permit operatives to connect, in private Unions and individuals have lobbied for businesses to be required to enable confidential networking on line. Industry-wide appeals bodies/ voluntary codes Industry solutions are under explored in the UK and it could be possible to build on current recommendations around the TrustSeal model of voluntary codes e.g. for platform workers who are disconnected and who do not have rights to go to tribunals or courts. 38|39 DRAFT 39 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Issue Prospects Comment Tax, social rights, immigration Impose withholding tax on platforms Outside the scope of the Review and a controversial issue especially at election time. Extend VAT to workers As above, with the added complexity that there is current litigation around the ‘agency’ status of Uber, and politicians may not want to preempt that. Social security equalisation It is very likely the review will recommend a ‘direction of travel’ whereby self-employed people, workers and employees pay the same social security contributions. The elephant in the taxi is whether it will be suggested that businesses/employers should have to pay greater social security contributions. There is a 13.8% difference. Extend sick leave/family rights to workers Another direction of travel point – the review may suggest working towards this but it does relate to social security and tax policy. Retirement savings for workers/self-employed Some form of behavioural economics approach to nudging the self-employed to save, similar to employees under auto-enrolment rules, is likely. Those who are workers are already entitled to be auto-enrolled – here, enforcement is likely to be stepped up after current cases have gone through appeal processes. Require right to work checks on workers Currently, only employers are required to check the immigration status of their employees. Those who use ‘workers’ and the self employed are not. Since there is movement between the categories, given the unfair advantage that could be held to exist for those who engage workers, and UK government policies, there is some attraction to this but it may be politically sensitive. Other policy issues Training and development Competition law and unfair practices Health and Safety, investment and public policy These are to be explored in the context of comparative nations. The UK may look to places like Korea, Israel, Lithuania, Ukraine for models around training and development, and the relationship between investment in new enterprises and trade relations. There is a big question around the relationship between competition law and market share, balancing the rights and benefits of consumers and labour providers. Perhaps too big for this review, but one to keep an eye on. Sources: UK House of Commons Work and Pensions Committee evidence and report 2017; UK House of Commons Business Employment and Industrial Strategy Committee evidence 2017; Royal Society of Arts ‘Good Gig’ 2017; Royal Society of Arts ‘The Entrepreneurial Audit 2017; Matthew Taylor’s RSA Blog; The Independent; The Guardian; Financial Times press reports November 2016 – April 2017 Key: Materially unlikely Possible Quite likely Probable Very likely DRAFT 40 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Who is ‘we’? The European Commission, UK parliamentary reports and likely contents of the Taylor Review display some consensus that collective efforts – whether industrywide, regulators and politicians, workers and owners – are needed to arrange a new model of work. How far can platforms and mainstream employers be persuaded to buy into this – are they part of the club? In response to the issues preoccupying larger employers at the World Economic Forum referred to in the Introduction, most employers talked about re-training existing workforces in reaction to the challenges of work, and the use of more atypical workers barely made it into the top six solutions. Yet other studies predict increasing use of a fluid or flexible workforce, with a central question being the relationship between rights and flexibility. How far can the idea of the social contract be maintained at a time of national political divergence? The German government has written: “We must determine how businesses which operate internationally can be required to pay their fair share of (national) taxes and charges in future. It is necessary to create the legal framework for this, conclude European and international treaties and agreements, and develop mechanisms to monitor compliance … and to sanction non-compliance”. Source: Re-imagining work. Green paper Work 4.0, 2015 With elections across Europe and a changing order in relations between the US and the rest of the world, there are strong challenges to this objective and the aims of the proposed European Social Pillar. The magnifying effect of Brexit is all the stronger. Despite the talk of scorecards and benchmarking in European policy terms, there is now a prospect of defining national success in competition with other systems. To what extent is the UK’s wish or need to differentiate itself able to be reconciled with inter-dependent trade policy? “We do not need a ‘third way’ because it already exists here. In fact, it is possible for a ‘fourth’ or ‘fifth’ way to apply in the gig economy. The UK recognises many more legal statuses under employment law than the US” Source: RSA: Good Gigs, April 2017 or, one might add, the EU. And yet, if the UK maintains its effective incorporation of EU law, and continues to use the evolving ‘worker’ model, it may achieve a balance of flexibility and rights. It may be able to have a relatively future-proofed part of industrial strategy that can help take advantage of Brexit, and rebut potential trade partners’ accusations of social dumping or unfettered competition. 40|41 DRAFT 41 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Farmville Easing the anxieties about the evolution of work will partly be helped by managing two harvests: tax and data. When we first wrote on modern work, we were struck by the reliance of surveys on extrapolation, double counting and imprecise terminology. Roll forward eighteen months and the quality of the guessing has improved, but it is still largely guessing. Consistent studies and anecdotal commentary do show that, across Europe, tax treatments drive behaviour. While predicting the impact of means/end changes is hard. All that said, weaving tax and data gathering may give a thread to find a way out of the labyrinth, as with industry-wide data sharing in Benefit gig. X “Governments will need to find the right balance, creating regulatory regimes designed for the future – nimble, real-time and powered by big data and smart technologies”. Source: EY, The Upside of Disruption, 2016. X “HMRC [the UK tax authority] is going to have to continue to review its information gathering powers and practices. Could it start by requiring platform operators to check that all its worker users have a relationship with HMRC? Could the platform … [make] … returns for those that engage with it?” Source: UK Office of Tax Simplification, December 2016. X Most larger companies now capture large amounts of real-time data valuable to governments. “Collecting truly representative data will at times require the force of law for compliance and anonymity. It might also require new modes of public private partnerships – including ways to incentivise the collection of data that are of great value to society but have little direct value to the private organisation that is best positioned to collect them. This reflects the fact that information, which can often be shared at close to zero marginal cost, is the ultimate public good”. Source: Mitchell & Bynjolfsson, Track how technology is transforming work, Nature, April 2017. One way to help form better policy could be to reverse the laments of large platforms about the closed book of government data, and have governments work with business to enable the gathering of data. Is there a new deal to be done? Sean Nesbitt, London DRAFT 43 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Taylor Wessing Contacts Editor Sean Nesbitt Partner, London +44 (0) 20 7300 4294 email@example.com Sean leads Taylor Wessing’s Employment, Pensions and Mobility group internationally and the UK’s specialist advisory services practices (comprising those groups, tax and financial services regulation). He is a Fellow of the Royal Society of Arts. Contributors We advise many agencies and outsourcing clients and providers. Taylor Wessing’s industry focus on the tech sector results in us acting for more US corporations setting up in the UK and across the rest of Europe than other law firms. We have an office in Tech City in London as well as Berlin, the German tech centre. We see new ways of working in the digital economy. We advise digital platforms on achieving their goals with their ‘human capital’. We understand the confluence of tech+modern work forms for employment issues across industries. Austria Wolfgang Kapek Partner, Vienna +43 1 716 554 22 firstname.lastname@example.org Manuel Muellner Associate, Vienna +43 1 71655 0 email@example.com France Claudia Jonath Partner, Paris +33 1 72 74 03 23 firstname.lastname@example.org Germany Sebastian Buder Partner, Berlin +49 (0) 308 856 36 320 email@example.com Marc Gimmy Partner, Düsseldorf +49 (0) 211 83 87 121 firstname.lastname@example.org The Netherlands Bart Hunnekens Counsel, Eindhoven +31 (0) 8802 43030 email@example.com UK Sean Nesbitt Partner, London +44 (0) 20 7300 4294 firstname.lastname@example.org Paul Callaghan Partner, London and London Tech City +44 (0) 20 7300 4210 email@example.com Joe Aiston Senior Associate, London +44 (0) 20 7300 4094 firstname.lastname@example.org Rachel Farr Senior Professional Support Lawyer, London +44 (0) 20 7300 4278 email@example.com Mark Smith Partner, London +44 (0) 20 7300 4090 firstname.lastname@example.org Peter Wilson Senior Associate, London +44 (0) 20 7300 4923 email@example.com DRAFT 44 Modern work: flexibility, rights, jobs, tax Mapping European roads to the future Taylor Wessing offices X Amsterdam Parnassusweg 823 1082 LZ Amsterdam Tel. +31 (0)88 0243 000 X Beijing Unit 2307&08, West Tower, Twin Towers B-12 Jianguomenwai Avenue Chaoyang District Beijing 100022 Tel. +86 (10) 8593 0200 X Berlin Ebertstraße 15 10117 Berlin Tel. +49 30 885636 0 X Bratislava Taylor Wessing Panenská 6 81103 Bratislava Tel. +421 2 5263 2804 X Brno Taylor Wessing Dominikánské námĕstí 4/5 602 00 Brno Tel. +420-543 420 401 X Brussels Trône House Rue du Trône 4 1000 Brussels Tel. +32 (0) 2 289 60 60 X Budapest Taylor Wessing Dorottya u. 1. 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Taylor Wessing’s international offices operate as one firm but are established as distinct legal entities. For further information about our offices and the regulatory regimes that apply to them, please refer to: www.taylorwessing.com/regulatory.html TW_00 Europe > Middle East > Asia taylorwessing.com © Taylor Wessing LLP 2017 This publication is intended for general public guidance and to highlight issues. It is not intended to apply to specific circumstances or to constitute legal advice. Taylor Wessing’s international offices operate as one firm but are established as distinct legal entities. For further information about our offices and the regulatory regimes that apply to them, please refer to: www.taylorwessing.com/regulatory.html TW_001928_04.17
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