This month, the UK government published its response to Good Work, the Taylor Review’s independent report into modern working practices. That report, published in July, made numerous proposals with the aim of securing fair and decent work for all. It covers many kinds of modern work – agencies, zero hours, contractors and the online gig economy.
The government response has been hailed as “the employment law shake up of a generation” by business leaders at the Institute of Directors and “big on grandiose claims, light on substance” by union leaders. Matthew Taylor himself, the man who captured the ideas, says that he welcomes “the direction indicated…, but there is more work to be done.” But what does the response actually say, and how soon can we expect change?
A reminder of the background
The UK has one of the most flexible labour markets in the world, with less regulation of temporary work than in other jurisdictions. After a number of highly publicised cases and concerns about new ways of working, the July 2017 Good work: the Taylor review of modern working practices acknowledged the strong performance of the UK labour market, and argued that all work in the UK economy should be fair and decent, with realistic scope for development and fulfilment. The report set out seven steps to be taken, acknowledging the importance of good work for all, fairer flexibility, the importance of good management, the importance of progression at work and health in the workplace, and of clarity in the gig economy.Building on the Taylor Review’s recommendations, the Work and Pensions and Business, Energy and Industrial Strategy House of Commons Select Committees produced a joint report at the end of 2017, together with draft legislation to take their proposals forward.
A direction of travel: the government’s response
The government says it is committed to reform that makes modern work fit for the 21st century. There’s a lot in the response, and the four consultations which accompanied its publications – but not yet all the detail.
In summary, the government says that it is “taking forward” all but one of the recommendations in the Taylor Review – but that doesn’t always mean they have accepted them, or that we can expect immediate action to implement them.
For instance, the government has considered but decided not to pursue the Review’s recommendation that ‘rolled up’ holiday pay (paying an additional 12.07% of wages to workers in lieu of holiday) be made lawful, since it is contrary to EU law. This is an area where policy will maintain current EU rules, rather than there being a Brexit bonfire of regulation.
The UK’s present three-tier approach to employment status (employees, workers, and self-employed independent contractors) will remain; workers who are not employees are likely to be renamed ‘dependent contractors’. This is simply intended to make their status clearer, and will not itself bring new rights or obligations.
People who currently fall into a particular category are unlikely to move to another. Rather, the response acknowledges it should be easier to identify a person’s status, and clear to both business and the individual into which category they fall – and therefore, what their rights are.
The consultation asks how best to provide clarity without the need to go to an employment tribunal, and proposes that, once the test is clarified (and perhaps, codified in statute), an online test is developed.
HMRC has developed a similar tool for IR35 determinations, which is believed to have reduced instances of bogus self-employment. However, as anyone who has followed the history of that tool will remember, this is a highly complex task, in an area subject to change (the cases of Pimlico Plumbers in the Supreme Court and Uber in the Court of Appeal later this year will impact the current test).
The differences between tax and employment law are a source of confusion for many. The consultation considers the review’s recommendation for greater alignment between tax and employment status, and asks whether those deemed employees for tax purposes should therefore get employment rights, and if so, which ones. It would be surprising if much comes out of this.
Working time, pay, and the gig economy
Usefully, the government plans to consult on the definition of working time for platform workers, and to be clearer how the minimum wage applies to gig economy workers. Many platforms do not at present accept the view that merely being logged onto an app and waiting for a job is ‘working’, but the judges in the Uber and other tribunal cases have disagreed.
Many apps allow those working through them to be logged on to more than one app at once, and argue it cannot be right that individuals can earn the minimum wage more than once for the same waiting period. This ‘multi-apping’ has been acknowledged but to date, no solution has been found. They will want to contribute to the consultations. It is not clear yet how the minimum wage rules might be changed to deal with this, perhaps to active work (but how would this then impact those who earn the minimum wage in traditional ‘on call’ arrangements?) or by excluding the possibility of working for more than one employer at once. Clarity would certainly be welcome - although how exactly it will clear up that issue when platforms and apps can be so variable remains to be seen.
The government has accepted the Taylor Review’s recommendation to ask the Low Pay Commission to explore the impact of a higher National Living Wage/National Minimum Wage rate for non-guaranteed hours. The LPC will report back to ministers in October 2018, but it met with some criticism in parliamentary committee evidence and may not find favour.
Rolled-up holiday pay is unlawful, but the government will consult on increasing the reference period for calculation of holiday and holiday pay from 12 to 52 weeks, to better ensure all workers, but especially seasonal ones, receive their full holiday entitlement and businesses can smooth out fluctuations.
The government will analyse whether statutory sick pay should be made a basic right from day one, but which increases with length of service as holiday does at present, and whether a right to return to a job following sickness absence should be introduced.
Finally, the response includes support for the Taylor Review’s recommendation that those on gig economy platforms should be able to carry their good ratings from one platform to another, as investment managers try to when they move jobs. However, the government intends only to monitor GDPR implementation (which will make it easier for individuals to access their personal data) to see if further government action is required to support the transferability of ratings.
This is a political hotspot. It is bound up with attitudes to the EU.
While some people choose to be agency workers for the flexibility it gives them, the more vulnerable need protection. Pay transparency for agency workers should be improved, with rights to key fact information about who is responsible for paying them, and what the rates of pay will be.
The consultation seeks evidence on the extent of abuse of the ‘Swedish derogation’ (pay between assignments contracts) in the Agency Workers Regulations, and asks for opinions on options for its repeal or improving enforcement. (Evidence provided to the Taylor Review has already suggested that less reputable agencies use these contracts inappropriately.) If widespread, the derogation may be abolished.
The government is considering if the Employment Agency Standards Inspectorate should have its remit extended to umbrella companies and supply chain intermediaries and enforcement of the Agency Workers Regulations.
Right to request a more stable contract
The Taylor Review recommended that agency workers who have been placed with the same hirer for more than 12 months would have a right to request a direct contract, and the hirer must consider the request in a reasonable manner. Those who have been on a zero hours contract for more than 12 months should be entitled to request a contract that guarantees hours better reflecting the actual hours worked.
The government response goes further than the Taylor Review, and commits to creating a new right to request a more predictable contract for all workers, including zero hours and agency workers. The government will consult on how best to effectively implement this right. This could be more significant than it looks – over time, the right to request flexible working that was introduced in 2003, has meant more variety in work patterns.
A number of the Taylor Review’s recommendations intended to improve transparency are being taken forward:
- All workers should receive information about the terms of the working relationship from the very beginning (a ‘Day 1 statement’), but precisely what information and in what format remains open to consultation.
- All workers should be entitled to an itemised pay slip (stating the hours worked for time-paid workers) from 6 April 2019.
- The government proposes changing the law to extend the period for a break in continuity of service from one week. (Many employment rights are dependent on length of service, such as unfair dismissal and the right to maternity pay.) The consultation asks whether it should be two weeks or higher, and asks whether the criteria and exemptions for breaks in service need to be amended. There will be new guidance to clarify the rules.
- While pointing to the Acas guidance published in November 2017, the government has committed to updating and consolidating the pregnancy and maternity pages on its website GOV.UK by Summer 2018. It will also review the legislation relating to protection against redundancy and keep existing protections under review.
- The government will also explore publicity campaign options to better communicate entitlements to all workers.
Reporting and accountability
This government has an appetite for requiring business to disclose its practices online.
The Taylor Review said companies beyond a certain size should report certain information on their workforce structure and the number of requests from agency workers for direct contracts and zero hours workers for contracts better reflecting hours worked.
The government does not propose immediate change, but will monitor the impact of planned corporate governance reforms (which include plans to require large private companies to account for their business conduct) and will take further action if these reforms do not change behaviour. Guidance for companies on the content of annual reports will be revised to encourage companies to provide a fuller explanation of workforce models and practices.
The government is consulting on how to enhance employee engagement, which includes changes to the Information and Consultation Regulations 2004 (ICE Regulations). What are the benefits of making it easier for workers to trigger formal consultation with their employer?
The government has accepted the Taylor Review’s recommendation that the government work with bodies such as Acas, trade unions and Investors in People to identify and develop ways of promoting better employee engagement, and ministers and officials will hold meetings with experts in the coming months.
The ICE Regulations appear (based on old data) to have had limited impact. The government say they are committed to employees having a voice at work, but will consult further on the recommendation to reduce the threshold for implementation of the ICE Regulations from 10% to 2% of the workforce. This is more radical than it looks. There are a number of union recognition battles that are hard for workers to win. The proposal would go some way to reverse that pattern.
Enforcement of employment rights
The present two tier approach to enforcement works, says the government – some basic rights (such as to the National Minimum Wage) are enforced by the state (HMRC), while others are the subject of employment tribunal claims.
The government is consulting on extending state enforcement to other basic employment rights, such as sickness and holiday pay, for the lowest paid workers, so long as enforcement can be targeted at those most likely to be in breach while minimising burdens on compliant businesses and ensuring that all activity is cost-effective.
The government plans to simplify the enforcement process for employment tribunal awards, and to introduce a new naming scheme for unpaid employment tribunal awards. The consultation published with this response will consider specifically how reforms across the courts and tribunal service to the process for dealing with unpaid awards should work in employment tribunals.
Employment tribunal fines may increase to £20,000 for employers showing malice, spite or gross oversight, while tribunal judges will also be required to consider stronger punishments for employers who ignore previous tribunal judgments, as the government agrees that fair and transparent framework will act as a deterrent. The consultation asks detailed questions around how these recommendations can be implemented – for example, what precisely a “repeat offence” would be.
Apprenticeships and internships
The law is clear that if interns are workers, they should receive the appropriate pay. There will be new guidance and targeted enforcement activity by HMRC to stamp out illegal and exploitative unpaid internships, while engaging with sectors where good practice is already common.
Apprenticeships should be “real, paid jobs”. There are already steps in place to ensure the quality of apprenticeships: they must be of at least 12 months’ duration, involve sustained training and clear skills gain, and must include English and maths for those who have not achieved good GCSEs in those subjects. There should be a unified framework of employability skills, also open to employers and schools, as part of the reform of technical education.
The government will continue to assess the impact of the apprenticeship levy and apprenticeship reforms, and will work with employers on how the levy works so that it works effectively and flexibly for industry and supports productivity.
Support for the self-employed
‘Workertech’ solutions support individuals in sharing information, calculating benefits and bringing workers together as a collective voice.
The government, working with partners, wants to stimulate further development of models and platforms to support the self-employed and to improve their pension provision – and, of course, to ensure that they pay the right tax.
And what’s been dropped
As well as rolled up holiday pay mentioned above:
- unsurprisingly, the government has no plans to increase self-employed National Insurance contributions. While the government agrees with the Taylor Review that the small differences between employed and self-employed benefits no longer justify the scale of difference between the National Insurance contributions paid, the attempt to change this in the Spring 2017 Budget ended in a government climb-down.
- the government has ruled out the presumption of “worker by default“ in the Select Committees’ draft legislation (so that the employer was required to show the individual was self-employed, and not the other way round), at least until the tests for employment status are certain and an online test has been developed
- non-compete clauses will remain. In 2015, the government issued a Call for Evidence on whether such clauses prevent individuals moving between jobs, and whether the UK should follow other jurisdictions (notably California) in banning them. The government noted that respondents found such restrictions to be necessary and valuable, and no action will be taken.
So what now?
Companies using app-based workers will especially need to watch developments in case law closely, particularly around the questions of employment status and working time.
Several of the proposals, particularly around the national minimum wage and agency workers, have a clear cost to employers and end-users if implemented. Those using agency workers currently engaged under Swedish derogation contracts and those who use zero-hours workers should model the costs of increased hourly rates to their business operations.
While the will to develop a framework fit for the British labour market in the 21st century may be there, so long as detail is sparse, it will be hard to assess the impact or timing.
The government has issued four consultation papers with closing dates between 9 May and 1 June. It seems the government is trying to build consensus behind an important domestic policy change, and also to avoid taking a position that cannot be delivered: all while Brexit looms, and takes up government time.
For example, employment status is a huge issue and, for all of the questions around what the test should be, the government has not laid out its own proposal, and simply thrown open the door to suggestions. An online test which produces accurate results will take even longer to achieve.
The disadvantage to this approach is that the Taylor Review itself took months to listen to the views of and evidence provided by lawyers, employers, gig economy platforms, trade unions, think tanks and other interested parties before reaching its recommendations. It seems unlikely that the responses to the government’s own consultations will vary much from those already shared with Matthew Taylor and his colleagues.
How long the government will take to respond will no doubt depend on the number and content of the responses, but are likely to be a minimum of three months, probably six, and perhaps even longer. The consultations will run parallel to cases which are continuing to develop the law in this area and to the Brexit timescale.