The UK Prime Minister and her adviser, Matthew Taylor, today (11 July 2017) launched the pathfinding report on prospective employment strategy in the UK. With Brexit proposals, it forms the centre of policy discussion for the next few months. Like Mark Zuckerberg when he changed Facebook’s motto (above), the UK is seeking a grown up approach to better business which de-bugs employment law and implies sustainable practice. We will analyse the implications further, but our initial take on proposals is below.

Direction of travel: a distinctive British strategy

The UK was among the first countries to experience the original Industrial Revolution. With Brexit, there is a pressing need to think ahead of the curve and set out a sustainable approach to the Fourth Industrial Revolution. The balance of flexibility with rights and technology with human approaches seeks to provide continuity, and to enable the UK to generate new opportunities. Retaining and modernising the UK’s distinctive worker status with the “dependent contractor” tag may help the UK provide a good labour market to compete for international investment, without risking European trade sanctions for undermining EU rules or worker rights.

Some high level clarification on the key status tests (for a dependent contractor) would be welcome. The report recommends a focus on control as a clean way to measure who is a “dependent contractor”. The test of “control” to give dependent contractor rights is consistent with the pattern of case law on which we have previously reported. Rights would not be removed or increased – there would be a series of measures aimed to provide clarity.

Platform businesses

There is genuine encouragement for flexibility, without singling out tech-based models for unfair regulation or benefits.

Requiring platforms to share data on the rate for the job and letting them flex the national minimum wage rate downwards for slack periods has had union criticism. But it is perhaps a way to deal with the problem of workers looking to be paid for having multiple apps running simultaneously (see here for our recent article on this).

Platforms and other work providers will still not be required to match the obligations on current employers to carry out “right to work” checks. Many platforms already value trust and verification where they provide personal services like beauty therapies, care and cleaning, but there is no mandatory immigration law burden added.

Applying the law

There are some more rules here, which may reduce scope for dispute and are not just “red tape”. Since most businesses value certainty, there are long term gains from providing written terms to contractors, and to employees, from day one. The proposals call for free, non-binding, status guidance to be provided online. Employment tribunals will provide more clarity through early hearings without delay, while still letting models be tested if litigation is necessary. The presumption that employer or worker status exists is perhaps not much more than an extension of current experience, and is rebuttable with a well-thought out business model.

The current low level of employment tribunal claims is likely to be maintained, even if tribunal fees are ultimately reduced (a measure outside the scope of the Taylor Review). The proposed punitive sanctions for “repeat offenders” who fail to apply judgments to similar workers or who fight each case as it comes, arguing different facts, would force businesses to decide quickly how robust their model is, and move away from regulatory/litigation arbitrage.

Voice and participation

The Taylor Review argues for greater feedback and engagement practices but contains no strong proposal for union rights. It proposes lower thresholds for workplace councils (just 2%, not 10%, of employees would need to consent) meaning hotels, fulfilment centres and public sector businesses could more easily be affected. Some employers may see these as an alternative to unionisation, or as a “safety fuse” to social media and brand-damaging campaigns. For others, there are challenges to their engagement strategies. Games will need to be raised.

Pay, rights and remedies

Rolled up holiday pay (an allowance paid in addition to wages, rather than specifying the number of days which the individual is entitled to take as paid holiday), is currently unlawful under EU law. The report proposes that dependent contractors would be entitled to rolled up holiday pay, meaning that an additional of 12.07% could be added to each pay packet instead of holidays. The right to paid holiday is a health and safety measure, so checks would have to be put in place to prevent dependent contractors from working 52 weeks of the year. There is no suggestion that this would be put in place for employees as well, but many businesses would welcome the right to roll up holiday pay for other staff. This would represent a possible diversion not just within the two tiers of workers who are not self-employed, but from EU law – contrasting with Prime Ministerial statements on maintaining EU based rights post-Brexit.

Agency workers would have the right to request engagement with the end-user, and zero hours workers would have the right to request fixed hours – in each case after 12 months’ service. But zero hours contracts would not be outlawed – merely required to be paid at a higher rate.

Separately, it is proposed that HM Revenue & Customs should add holiday pay (for the lowest paid workers only) to its existing duty to enforce the national minimum wage and statutory sick pay, as well as a new obligation to stamp out exploitative unpaid internships. They would need resources.

Tax and benefits

Greater symmetry in tax for employees and workers (or dependent contractors) is recommended – a policy hot potato. More detail on this is going to be needed.

Health and happiness

Quality work is strongly linked to better health outcomes for individuals. The report makes an interesting gesture at moving to a US style approach, with greater roles for city mayors and local organisations to take responsibility for health at work. Proposals about social security benefits show a direction of travel towards reducing the difference between the treatment of the employed and the self-employed. Statutory sick pay is not available to the very lowest paid at present, but under the report would become a day one right, like holiday pay, accrued according to length of service. It suggests giving those who are absent due to a long period of illness have a right to return to the same job similar to that available to those on family leave.

Portable benefits platforms, which allow self-employed or dependent contractors to access a range of non-statutory benefits and protections, would be encouraged. The government is recommended to work with FinTech partners to create new WorkTech solutions. Again, we wrote to you about this recently here.

To be continued

We have focussed on the main legal changes or enhancements. Other cultural features – e.g. about training, lifetime learning and development – merit a look later. For now, remember these are proposals for a government review over the Summer, and a week is a long time in politics. Especially when France, Germany and other states are grappling with their own possible reforms.