Improved rights at work recommended
The gig economy, insecure work, disputes about employment status and zero hours' contracts have all dominated the headlines recently.
Today's publication of the Taylor Report, Good Work: The Taylor Review of Modern Working Practices gives a clear sign of the priorities identified by Matthew Taylor regarding the changes to employment practices that are needed to keep pace with modern business models. In a wide-ranging Report Matthew Taylor has proposed seven principles for fair and decent work and these include many recommendations in the employment context such as renaming the category of "worker" to "dependent contractor", guarantees about the national minimum wage, improvements to the quality of work on offer and enhancement of skills and the removal of Employment Tribunal fees for claims to determine employment status.
Significantly, the Report states that "The same basic principles should apply to all forms of employment – there should be a fair balance of rights and responsibilities, everyone should have a baseline of protection and there should be routes to enable progression at work".
In launching the Report, Theresa May said, "While avoiding overbearing regulation, we will make sure people have the rights and protections they need."
The background to the Report, which was commissioned by the Government in November 2016, was growing concern about the lack of employment rights and low pay faced by many people working in the gig economy. The categorisation of people as being "self-employed" when in reality, they were "workers" or "employees" meant that many people were missing out on key employment rights such as the right to the national minimum wage and paid holiday and the right to be enrolled in a workplace pension. These concerns have been exacerbated by the huge growth in self-employment. According to the Report, self-employment reached a high of 15% total employment during 2016.
But that's not all. There is evidence that some businesses are using self-employment status as a way of avoiding tax so there are concerns too about lost revenue to the Treasury and the potential unfairness in the tax system.
All of this is against the backdrop of ongoing, high profile litigation about employment status involving organisations such as Uber, CitySprint, Deliveroo and Pimlico Plumbers.
However, it's not all bad news. Many people work in the gig economy because of the flexibility and independence it provides in relation to how, where and when they work. Indeed Matthew Taylor recognises that retaining this flexibility is crucial but that there should be two-way flexibility so that workers receive benefits yet still have the ability to work when they want.
So what are some of the key recommendations in the Report?
- It is recognised that platform-based working provides many opportunities for genuine two way flexibility and whilst this should be protected, there needs to be fairness for people who work through these platforms. A significant concern about the gig economy is that in many cases, people are classed as "self-employed" when, in reality, they are "workers". The distinction is significant because workers have certain basic employment rights while the third category, "employees" have enhanced employment rights. It is recommended that this three-tier approach regarding employment status should be maintained. However, it is recommended that the Government should have a clearer outline of the tests for employment status, setting out the key principles in primary legislation with separate guidance providing more detail. In this way, individuals and employers will have a greater level of certainty and understanding of which rights and responsibilities apply.
- Matthew Taylor recommends that people working for a firm that has a “controlling and supervisory” relationship with them should have to treat them as “workers” but that status should be renamed and changed to “dependent contractors” - the category of people who are eligible for workers' rights but who are not employees. This could mean that many people will receive holiday pay and sickness pay for the first time and the companies would have to pay national insurance contributions. In determining dependent contractor status, the principle of "control" should be of greater importance.
- To improve understanding and clarity of rights it is recommended that the current right of employees to receive a written statement of employment particulars within two months should be extended to dependent contractors but for both categories to receive this information on the first day of their job.
- Gig economy firms would not have to pay the minimum wage for every hour worked. The Report outlines a structure whereby firms are required to show that a person can earn at least 1.2 times the current national living wage of £7.50 an hour for those aged 25 and over. This will be done by showing the number of tasks/gigs that an average person working at an average rate can achieve. The report also recommends that people get real-time information about how much they are likely to earn on a shift. If it is a quiet period for the organisation and the rate may only be, say, £5 an hour, it is up to the gig worker to decide whether to take the job for that rate. In those circumstances the individual would not be able to make a claim for not getting the minimum wage. Matthew Taylor said he was recommending this to enable people to retain the option of working flexibly.
- The Government should tackle falling productivity and low job satisfaction by improving the quality of work for many people earning the minimum wage particularly in sectors such as retail, care work and hospitality. It is suggested that a set of measures be developed to assess the quality of low paid work across different sectors looking at such issues as access to training opportunities.
- Interestingly, the Report does not recommend a ban on zero hours' contracts on the basis that they are useful where there is a fluctuating demand for work. However, it is recommended that a specific right should be created to request a contract that guarantees hours which better reflect the actual hours worked over the previous 12 months. A similar right is recommended for agency workers to request a direct contract of employment after 12 months with the same hirer.
Sarah Peacock, Employment partner at Blake Morgan solicitors welcomes the publication of the Report but questions the need for introducing the new status of "dependent contractor" to replace "worker".
"Far from clarifying the position, replacing the category of "worker" with the category of "dependent contractor" could just complicate things for both parties. Whilst the concepts of "employee" and "worker" are sometimes difficult to distinguish they are long-standing, familiar concepts and it is difficult to see what the change in name will mean in practice. The Employment Tribunals are very experienced in looking at the realities of the working relationship and even when the contractual documentation states, for example, that an individual is self-employed, after applying various tests, the Tribunals often conclude that the individual is in fact a worker. This is what happened in the Uber and CitySprint cases and the Court of Appeal which heard the Pimlico Plumbers case. The intention of achieving clarity of status right at the beginning of the employment relationship through clearer legislation could be a positive step in the right direction. It will very much depend on how the legislation is drafted - the fact that case law tests have been around for years but never enshrined in legislation is a tell-tale sign of just how difficult this could be."
Sarah Peacock adds, "Interestingly, a report was published by the Work and Pensions Committee on 1 May 2017 which recommended that the Government should stop "bogus" self-employment practices where workers may lose out on certain employment rights. Significantly, the Committee recommended that there should be an assumption of the employment status of "worker" by default rather than "self-employed". Frank Field MP, who chaired the Committee at that time, has, in a separate report which was published just last week, suggested that the legal burden of proof regarding employment status should be reversed and the onus would be on companies to demonstrate that their workforces are genuinely self-employed. Perhaps this is a more straightforward way to proceed."
Sarah Peacock goes on to say, "Workers have many rights already, the problem is and always has been with the awareness of these rights and enforcement of them. For instance, people get confused with tax law where there are only two categories for tax purposes, employed or self-employed. Proposals for reform of the tax system were outside the scope of the Taylor Report and arguably any meaningful changes to the categories of employment status need to be alongside changes to the tax system although the Report indicates that dependent contractors should all be classed as employed for tax purposes."
"Pending that, individuals' employment rights need to be publicised more effectively but even then, we are still left with the issue of Employment Tribunal fees which to date, have been a deterrent for many people who want to determine their employment status. In a very significant development, the Report recommends that people should not have to pay the fee if bringing an Employment Tribunal claim to find out what their employment status is. In addition, the claim should be heard at an expedited preliminary hearing. This could be good news for many individuals but may not help others who might be concerned about the repercussions of bringing proceedings, for instance that they won't be being given any more work. As for other organisations involved in enforcement, such as the HMRC with the national minimum wage, it is suggested that it also takes over the enforcement of holiday pay claims for those on low pay. Will it continue to have enough resources to step in and carry out even more inspections?"
Times have certainly changed since the Taylor Report was commissioned. We now have a minority Government but many of the opposition parties are likely to welcome an extension of employment rights and greater access to the national minimum wage. Whether extending employment rights will be as great a priority as managing Brexit remains to be seen however.