Tag Archive: worker status

Government publishes response to Taylor Review and four consultation papers

The Government has today published ‘Good Work’, its response to the Taylor Review which investigated what impact modern working practices are having on the world of work. The Taylor Review published its report in July 2017 and made wide-ranging recommendations regarding reforms of the law on agency work, paid holiday, sick pay, flexible working and employee representation. The review found that the strength of the UK’s labour market is built on flexibility but that a clearer focus is needed on quality of work as well as the quantity of jobs.

The Government says that it will take forward all but one of the Taylor Review’s  53 recommendations. It has specifically rejected proposals to reduce the difference between the National Insurance contributions of employees and the self-employed and has no plans to revisit this issue. However, in many cases the Government is only proposing to consider or seek views on the Taylor recommendations and it has rejected parts of some recommendations. The result is considerably less radical than the headlines might suggest.

Employment status

The Government is launching a detailed consultation on employment status examining options, including new legislation, to make it easier for both the workforce and businesses to understand whether someone is an employee, worker or self-employed. The consultation closes on 1 June.

Other proposals

The Government is also proposing to:

  • Increase the holiday pay reference period from 12 weeks to 52 weeks;
  • Introduce a right for all workers to request a more predictable contract;
  • Extend the right to a statement of written particulars to all workers from day one and consult on what information to include;
  • Extend the right to an itemised payslip to all workers;
  • Ask the Low Pay Commission to explore the impact of introducing a new national minimum wage rate for hours that are not guaranteed;
  • Consult on extending the relevant break in service for the calculation of the qualifying period of continuous service beyond the current week (but not necessarily to a month as recommended by Taylor);
  • Consult on how definitions of working time (for the purposes of the national minimum wage) can and should apply to platform working;
  • Consult on whether to repeal the ‘Swedish derogation’ in respect of agency workers;
  • Introduce a naming and shaming scheme for unpaid employment tribunal awards;
  • Raise the maximum penalty for aggravated breach of employment rights from £5,000 to at least £20,000 (although since the penalty was introduced in 2014 only 20 have been imposed);
  • Launch a new campaign to encourage more working parents to share childcare through shared parental leave. Yesterday BEIS published a set of guidance and tools for parents thinking of taking shared parental leave; and
  • Carry out research on potential reform of statutory sick pay.

The Government is launching 3 additional consultations:

The Government is not taking forward the proposal to give ‘dependent contractors’ the opportunity to receive rolled-up holiday pay, or the proposal to reverse the burden of proof in employment status claims.

It should also be noted that the Government has specifically stated that it has not ruled out re-introducing fees in the employment tribunal system at some point in the future.

Although today’s response and consultation papers will move the debate on the issues raised by the Taylor Review forward, specific legislative change may still be some way off, particularly in the more complex areas such as employment/worker status.

Permanent link to this article: https://www.dlapiperbeaware.co.uk/17339-2/

Government select committees publish draft bill on worker status

The Work and Pensions (WP) and Business, Energy and Industrial Strategy (BEIS) Committees yesterday published a joint report, A framework for modern employment, (Report) which contains a draft Bill which aims to take forward some of the central proposals from the Taylor Review of modern working practices, which published its report in July.

The Report makes recommendations on the following issues which the Committees considered should be tackled in primary legislation:

  • Clearer statutory definitions of employment status: The Report recommends that the Government legislates to introduce greater clarity on definitions of employment status which should emphasise the importance of control and supervision. The draft Bill proposes amending s.230 of the Employment Rights Act to include a list of factors which the courts may have regard to in determining employment status, including whether the contract places an obligation on the individual to perform work personally, the potential to control how work will be carried out in relation to factors such as discipline, the rate of pay and when the work will be carried out, whether the individual is integrated into the business, financial risk and whether the individual is prohibited from working for others. The definition of worker status would remain the same apart from removing the requirement for personal service but the Bill provides that for the purposes of determining worker status the courts may have regard to the same factors as for employment status (except personal service) and also (i) whether the worker was engaged in marketing their business before the contract came into existence and (ii) whether any substitution clause is capable of being freely exercised in practice. The Bill also proposes a new definition of independent contractor; someone who is neither an employee or a worker.
  • Worker status by default: The Report recommends that companies with a self-employed workforce above a certain size should have the burden of establishing that an individual is self-employed in a worker status case, although the Bill as drafted would establish worker status by default in all status cases.
  • Higher National Minimum Wage for non-guaranteed hours: the Report recommends that the Government work with the Low Pay Commission to pilot a pay premium on the NMW and NLW for workers who work non-guaranteed hours. The intention is that this would operate essentially as an overtime rate for hours worked over the worker’s guaranteed hours.
  • Extension of the allowance for break in service for continuous service: The Report recommends that gaps in employment of up to 1 month (rather than the current 1 week) should not break continuous service.
  • Employment tribunals: The Report recommends that the Government creates an obligation on employment tribunals to consider the use of higher, punitive fines and costs orders if an employer has already lost a similar employment status tribunal case and that Government takes steps to enable greater use of class actions in disputes over wages, status and working time.
  • Flexibility and the National Minimum Wage: The Taylor Review raised concerns regarding the interaction of the NMW legislation and worker status for so-called ‘gig’ economy workers on digital platforms, meaning that to avoid the potential for workers making themselves available for work at periods of low demand but still being entitled to NMW, platforms would have to implement shift systems rather than allowing individuals to work when they want. The Taylor Review recommended that existing piece rate legislation could be adapted to avoid this risk and maintain flexibility. The Committees raised concerns that this proposal risked undermining the NMW and the Report recommends that the Government rules out introducing any legislation that would undermine the NMW.

The Report also makes the following recommendations for secondary legislation:

  • Extension of the entitlement to a written statement of employment particulars to workers from day 1 of a new job: The statement would need to be given within 7 days and contain a clear statement of employment status and details of the rights and entitlements of the individual by reference to that status.
  • Lowering the threshold for Information and Consultation forums: currently organisations must have 50 or more employees (not workers) and at least 10% and a minimum of 15 employees must request a forum. The Report recommends that workers should count towards both thresholds and the threshold should be reduced from 10% to 2% of the workforce.
  • Ending the Swedish derogation: the Swedish derogation permits an opt-out from the right for agency workers to have equal treatment in relation to pay to comparable employees where the agency workers receive pay from the agency between assignments. The Report recommends that Swedish derogation be abolished and that the Employment Agency Standards Inspectorate should be given the powers and resources necessary to enforce the remainder of the Agency Worker Regulations 2010.
  • Stronger penalties for repeat or serious breaches of employment legislation: the Report recommends that the Government bring forward stronger and more deterrent penalties including punitive fines and expands the ‘naming and shaming’ regime which applies to NMW breaches to all non-accidental breaches of employment rights.
  • Greater resources for the Director of Labour Market Enforcement and the main enforcement agencies to undertake investigation and enforcement.

It is important to stress that this is not a Government Bill and the Report acknowledges the main obstacle to taking forward legislation at this time, namely the lack of Government resources in light of Brexit. A formal Government response to the Taylor Review is expected before the end of the year, which may make clear what, if any, legislative response there will be to the Taylor Review in the near future.

In the meantime, it is expected that the Budget on Wednesday will include proposals to extend ‘off-payroll working’ rules from the public sector to the private sector, which would require companies to deduct tax and National Insurance Contributions automatically from the gross pay of self-employed workers who work through personal companies. Employment status and the rights which attach to the different categories of worker look set to continue to be major issues into 2018.

Permanent link to this article: https://www.dlapiperbeaware.co.uk/government-select-committees-publish-draft-bill-on-worker-status/

Taylor Review report into employment practices in the modern economy published

The Taylor Review’s final report on employment practices in the modern economy has been delivered to Government and published on 11 July 2017. The Review panel, chaired by Matthew Taylor, has made a number of recommendations for specific measures which the Review panel would like to see enacted as soon as possible, but also makes the case for longer term strategic shifts. As an overarching principle, the report issues a call to sign up to the ambition that all work will be good work as measured against six high level indicators of quality: wages; employment quality; education and training; working conditions; work life balance; and consultative participation and collective representation.

Seven key policy approaches

The Review sets out seven key policy approaches towards fair and decent work which underpin the panel’s recommendations, broadly as follows:

  1. Our national strategy for work should be explicitly directed toward the goal of good work for all. 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. Over the long term taxation of labour should be more consistent across employment forms whilst improving the rights of the self-employed;
  2. Platform-based working offers opportunity for genuine two-way flexibility and should be protected whilst ensuring fairness. Worker status should be maintained (but re-named dependent contractor’ status) but we should be clearer about how to distinguish workers from the self-employed;
  3. The law should help firms make the right choices and individuals to know and exercise their rights. Dependent contractors need additional protections and we need stronger incentives for firms to treat them fairly;
  4. The best way to achieve better work is responsible corporate governance, good management and strong employment relations rather than regulation;
  5. Everyone should feel they have realistically attainable ways to strengthen future work prospects through training;
  6. The UK needs a more proactive approach to workplace health; and
  7. The UK needs sectoral strategies to ensure that people are not stuck at the living wage minimum.

The report makes the following practical recommendations to further these principles:

Employment status

Determining employment status must be simpler, clearer and give individuals and employers more information.The report notes that how the law on employment status is interpreted varies widely and that legislation must do more to improve clarity. The report refers to the current tests and factors which determine employment status, namely personal service, mutuality of obligation, control and whether the individual is carrying out a business undertaking and suggest that if the Government considers these to be an accurate reflection of the main characteristics of employment status, they should be outlined in legislation. The detail underpinning these high level criteria should be specified in a way which can be updated quickly, such as secondary legislation or guidance.

Worker status

The Review favours maintaining the existing three-tier approach to employment status with employees, the self-employed and an intermediate status (currently worker) between the two but recommends re-naming the intermediate status as ‘dependent contractors’. There should also be a clearer distinction between employees and dependent contractors, with a clearer definition of dependant contractors which better reflects the reality of modern working arrangements. The report specifically recommends removing the requirement for personal service and giving control greater importance. Essentially, people working for a firm that has a controlling and supervisory relationship with them should have to treat them as workers.The report also recommends extending the right to a written statement of basic terms and conditions, including holiday, sick pay and pension, at the start of employment to dependent contractors and introducing a standalone right to bring a claim for compensation if the employer fails to do so.The report also recommends the development of an online tool to provide an indication of employment status similar to HMRC’s online tool for tax status.

The ‘gig’ economy

Recognising that the proposed change to the test for worker status would potentially bring many more individuals in the so-called gig economy within worker status, who would then become entitled to the National Minimum Wage (NMW), the report recommends changes to how the NMW is calculated in order to preserve flexibility. under this proposal, firms would not have to pay workers the minimum wage for every hour that they are, for example, logged onto a platform. Instead, Taylor is recommending that the Government adapt the piece rate legislation to enable platforms to compensate workers based on output provided they are able to show that the average worker receives 1.2 times the minimum wage, that workers can choose when they work and that they get real-time information about how much they are likely to earn on a shift.The report also recommends that Government should strongly encourage gig platforms to enable individuals to be able to carry approval ratings with them when they move from the platform.

Tax and the rights of the self-employed

The report recommends that renewed effort should be made to align employment status with tax status, and also calls for a debate about how labour is taxed. The employed are currently taxed more than the self-employed, which the Government had proposed to address by putting up national insurance contributions for the self-employed, until a backlash forced it to drop the idea in March. Taylor believes that the level of NICs paid by employees and the self-employed should be moved closer to parity, but that the self-employed should have additional rights, particularly to parental leave.

Zero hours contracts and casual work

The report does not recommend banning zero hours contracts, but does recommend that people engaged on zero hours contracts should have the right to request fixed hours with a starting assumption of the average hours worked over the previous 12 months. Companies should have to publish information about how many such requests are received and granted.The report also recommends that the Low Pay Commission should consider the introduction of a higher rate of NMW payable for hours which are not guaranteed as part of the contract.The report also recommends increasing the maximum gap between work assignments which will not break continuity of employment from one week to one month (or potentially longer in specific circumstances) to make it easier for casual workers to qualify for employment rights.

Paid holiday

The report recommends increasing the reference period for the calculation of holiday pay to 52 weeks so that casual workers receive holiday pay based on their average earnings over the year. The report also recommends that individuals should have the choice to be paid rolled-up holiday pay, meaning that a dependent contractor could choose to receive a 12.07% premium on pay rather than being paid during holiday periods.

Statutory sick pay and sickness absence

Statutory sick pay should be reformed so that it is explicitly a basic employment right for which all workers are eligible regardless of income from day 1, payable by the employer and accrued on length of service. Employers would no longer face liability for long periods of paid sick absence for those who have only worked for them for a short period, but many more workers would be entitled to receive SSP.The report also recommends that individuals with a relevant qualifying period should have the right to return to the same or a similar job after a period of prolonged ill-health, similar to the current protection for employees returning from parental leave.

Agency workers

The report recommends that agency workers should have the right to request a direct contract of employment with the hirer if they have been placed with the same hirer for 12 months, with the hirer required to consider requests reasonably.The report also recommends removing the so-called ‘Swedish derogation’ from the agency workers regulations. At present, if the agency engages an agency worker on terms which provide for payment between assignments, the agency worker is not entitled to be paid the same as a permanent member of staff doing the same job after 12 weeks.

Family-friendly rights and flexible working

The report recommends that the Government should review and consolidate guidance on the legislation which protects workers who are pregnant or on maternity leave and consider further options for legislative intervention on pregnancy and maternity discrimination.The Government should also consider how to further promote genuine flexibility in the workplace, for example whether the right to request flexible working should cover temporary changes to contracts.

Employee representation

The report recommends that the Government should examine the effectiveness of the Information and Consultation Regulations, extend them to cover workers and reduce the threshold for employee requests from 10% to 2%. Government should also work with Investors in People, ACAS and trade unions to promote development of better employee engagement and workforce relations.

Transparency and reporting

Government should require companies of a certain size to publish information to:

  • Make public their model of employment and use of agency services beyond a certain threshold;
  • Report on the number of requests received and agreed to from zero hours contract workers for fixed hours;
  • Report on the number of requests received and agreed from agency workers for permanent positions.

Enforcement and employment tribunals

Taylor recommends that there should be a new, fee-free procedure for workers to get a ruling on their employment status from an employment tribunal at an expedited preliminary hearing. The burden of proof should be reversed where status is in dispute so that the employer has to prove the individual is not entitled to the relevant employment rights.

The Government should also create an obligation on employment tribunals to use aggravated breach penalties and costs orders against employers who have already lost an employment status case on broadly comparable facts where further individuals bring claims. Government should allow tribunals to award uplifts in compensation if there are subsequent breaches against workers with the same or materially the same working arrangements.

The Government should take action to enforce tribunal judgments and establish a name and shame scheme for employers who do not pay tribunal awards within a reasonable time.

The report recommends that in the long term HMRC should take responsibility for enforcing holiday pay for those on low pay and the Government should consider whether unauthorised deductions claims should also be state-enforced. HMRC should also take enforcement action to stamp out unaid internships.

Next steps

Although the Queen’s Speech made no specific commitment to bring forward legislation to implement the Taylor Review’s recommendations, it is widely predicted that the Government will take action to implement at least some of the Review’s proposals. However, without a majority, legislation in this area may be difficult to push through. Speaking at the launch of the report today, the Prime Minister said “When I commissioned this report I led a majority Government in the House of Commons. The reality I now face as prime minister is rather different. In this new context, it will be even more important to make the case for our policies and our values, and to win the battle of ideas both in parliament as well as in the country“.

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