Future World of Work and Rights of Workers Inquiry
Date Published: 12 July 2017
Matthew Taylor’s much anticipated review of Modern Working Practices was published on 11 July 2017 and there is much to digest. The wide-ranging recommendations encompass many aspects of the working relationship – not just for those working in the gig economy – and, if put into practice, will herald the most ambitious overhaul of working conditions in recent times. It is now for the government to decide how to take forward the myriad recommendations – no mean feat with Brexit negotiations already in progress.
Many of the recommendations were anticipated, notably better clarification of employment status and greater protection for gig economy workers, and others finding themselves ill catered for by legislation conceived before current engagement models were anticipated. Other recommendations go further than many anticipated, including those calling for significant reforms to the employment tribunal process. The aims of the report are laudable and, if achieved, will create a better work economy for all. But as ever, the devil is in the detail, and providing a transparent framework for assessing employment status has been a perennial and complex problem. Understanding employment status is key for employees and employers to know what employment protections they have; getting the guidelines right is therefore key to underpinning the evolution of modern workforce rights and obligations as set out in the report.
Here is a summary of the key recommendations from the 115 page report:
Pregnancy and Maternity
Review and, in any event, consolidate in one place guidance on the legislation which protects those who are pregnant or on maternity leave, to bring clarity to both employers and employees. In parallel with the range of non-legislative options and the consolidation set out above, the government should consider further options for legislative intervention. If improvements around leadership, information and advice do not drive the culture change, the government will need to move quickly to more directive measures to prevent pregnancy and maternity discrimination.
Statutory Sick Pay
The government should reform Statutory Sick Pay so that it is explicitly a basic employment right, comparable to the NMW, for which all workers are eligible, regardless of income, from day 1. It should be payable by the employer and should be accrued on length of service, in a similar way to paid holiday currently. The government should ensure that there is good awareness of the right amongst workers and businesses.
Those individuals with the relevant qualifying period are already entitled to have their job protected for a period of time when they are away from work for perfectly reasonable reasons, for instance, having a child. A similar approach should be adopted for sick leave with individuals having the right to return to the same or a similar job after a period of prolonged ill health. This right to return should be conditional on engagement with the Fit for Work Service when an assessment has been recommended.
Pay Reference Period
The 12-week reference period for holiday pay should be made fairer for individuals who have peaks and troughs in work, and should be extended to 52 weeks. Workers should also have greater choice as to how they receive annual leave entitlement, with the option to receive “rolled-up” holiday pay in real time. (For a worker on the national living wage of £7.50 an hour, this would mean their actual remuneration was £8.41 an hour.)
As part of the statutory evaluation of the Right to Request Flexible Working in 2019, the government should consider how further to promote genuine flexibility in the workplace. For example, it should consider whether temporary changes to contracts might be allowed, to accommodate flexibility needed for a particular caring requirement. The government should work closely with organisations like Timewise and Working Families to encourage flexible working and initiatives like “happy to talk flexible working” to a wider range of employers.
Managing Gaps in Service
Extend, from one week to one month, the relevant break in service for the calculation of the qualifying period for continuous service and clarify the situations where cessations of work could be justified.
Transparency for Agency Workers
Amend the legislation to improve the transparency of information which must be provided to agency workers, both in terms of rates of pay and those responsible for paying them.
Introduce a right to request a direct contract of employment for agency workers who have been placed with the same hirer for 12 months, and an obligation on the hirer to consider the request in a reasonable manner.
The new Director of Labour Market Enforcement should consider whether the remit of the Employment Agency Standards Inspectorate (EAS) should be extended to cover policing umbrella companies and other intermediaries in the supply chain.
Repeal the legislation that allows agency workers to opt out of equal pay entitlements. In addition, the government should consider extending the remit of the EAS to include compliance with the Agency Workers Directive.
Improved Stability for Those Working on Zero Hours Contracts
There will not be a ban on zero hours contracts but instead, after 12 months an individual will have the right to request a guaranteed hours contract that reflects the actual hours worked. The starting point for the guaranteed hours would be the average weekly hours worked over the previous 12 months.
Ask the Low Pay Commission to consider the design and impacts of the introduction of a higher NMW rate for hours that are not guaranteed as part of the contract.
Establishing Employment Status
Replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail.
Improve clarity and understanding by providing individuals and employers with access to an online tool that determines employment status in the majority of cases.
The Future of the Worker
Retain the current three-tier approach to employment status as it remains relevant in the modern labour market, but rename as ‘dependent contractors’ the category of people who are eligible for worker rights but who are not employees.
In developing the test for the new ‘dependent contractor’ status, control should be of greater importance, with less emphasis placed on the requirement to perform work personally.
In redefining ‘dependent contractor’ status, adapt the piece rates legislation to ensure those working in the gig economy are still able to enjoy maximum flexibility whilst also being able to earn the National Minimum Wage (NMW).
In developing the new ‘dependent contractor’ test, make renewed effort to align the employment status framework with the tax status framework to ensure that differences between the two systems are reduced to an absolute minimum.
Consider how tax tribunal and employment tribunal rulings could be applied across jurisdictions – for example, in the shorter term and until the systems are aligned, the government could ensure that where a tribunal determines that an individual is an “employee” for tax purposes, that decision is also binding for employment law purposes.
Build on and improve clarity, certainty and understanding of all working people by extending the right to a written statement to ‘dependent contractors’ as well as employees.
Make it a statutory requirement for employees and ‘dependent contractors’ to receive that written statement on day 1 of their job.
Give dependent contractors the opportunity to receive rolled-up holiday pay.
‘Voice’ in the Workplace
Examine the effectiveness of the Information and Consultation Regulations in improving employee engagement in the workplace. In particular, that the threshold for implementation should be reduced from 10% of the workforce making the request to 2%.
Work with Investors in People, ACAS, Trade Unions and others with extensive expertise in this area to promote further the development of better employee engagement and workforce relations, especially in sectors with significant levels of casual employment.
Transparency of Information to Workers
Introduce new duties on employers to report (and to bring to the attention of the workforce) certain information on workforce structure.
Require companies above a certain size to:
- Make public their model of employment and use of agency services beyond a certain threshold.
- Report on how many requests they have received (and number agreed to) from zero hours contract workers for fixed hours after a certain period.
- Report on how many requests they have received (and number agreed) from agency workers for permanent positions after a certain period.
As the new apprenticeship system beds in, examine how it could be made to work better for those working atypically, including through agencies. The government should ask the Institute for Apprenticeships to work with sectors using high levels of lower paying and atypical work to ensure that they are making best use of the current apprenticeship framework.
Following the delivery of the 3 million apprenticeships that it is committed to, the government should consider making the funding generated by the levy available for high-quality, off-the-job training other than apprenticeships. The Institute for Apprenticeships should also be tasked with reporting on and addressing disparities in the take-up of apprenticeships for different groups.
HMRC should take responsibility for enforcing the basic set of core pay rights that apply to all workers – NMW, sick pay and holiday pay – for the lowest paid workers.
Ensure individuals are able to get an authoritative determination of their employment status without paying any fee and at an expedited preliminary hearing.
The Burden of Proof
The burden of proof in employment tribunal hearings where status is in dispute should be reversed so that the employer has to prove that the individual is not entitled to the relevant employment rights, not the other way round – subject to certain safeguards to discourage vexatious claims.
Winning or Losing Tribunal Proceedings
Make the enforcement process simpler for employees and workers by taking enforcement action against employers/engagers who do not pay employment tribunal awards, without the employee/worker having to fill in extra forms or pay an extra fee and having to initiate additional court proceedings.
Establish a naming and shaming scheme for those employers who do not pay employment tribunal awards within a reasonable time. This could perhaps be an element of the reporting which is suggested in relation to the composition of the workforce, including the proportion of atypical workers in the workforce.
Create an obligation on employment tribunals to consider the use of aggravated breach penalties and costs orders if an employer has already lost an employment status case on broadly comparable facts – punishing those employers who believe they can ignore the law.
Allow employment tribunals to award uplifts in compensation if there are subsequent breaches against workers with the same or materially the same working arrangements.
Self Employed Workers
The Review believes that the principles underlying the proposed National Insurance (NI) reforms in the 2017 spring budget are correct. The level of NI contribution paid by employees and self-employed people should be moved closer to parity, while the government should also address those remaining areas of entitlement – parental leave in particular – where self-employed people lose out.
Explore ways to improve pension provision amongst the self-employed, making the most of opportunities presented by digital platforms and the move to more cashless transactions.
Paying the Right Tax
Continue to work with providers to ensure that self-employed people have access to online tools that support compliance with the principles of ‘Making Tax Digital’ even if they do not meet the minimum statutory threshold.
Learning from the failings of Individual Learning Accounts the government should explore a new approach to learning accounts, perhaps with an initial focus on those with a long working record but who need to retrain, and those in receipt of Universal Credit. The new £40 million Lifelong Learning Fund is a starting point for this and should be developed by bringing together employers, civic society and the education sector.
The government should use its convening power to bring together employers and the education sector to develop a consistent strategic approach to employability and lifelong learning. This should cover formal vocational training, ‘on the job’ learning and development, lifelong learning and informal learning outside work. It could be linked to the longer-term development of life-time digital individual learning records. As part of this, the government should seek to develop a unified framework of employability skills and encourage stakeholders to use this framework.
The journey to providing “good work for all” will be long and complex, and whilst the aim of the recommendations is not to over-regulate or place an unreasonable burden on employers, it is difficult to see how the recommended changes can be brought into effect without employers grappling with considerable new regulation and guidelines. We will be closely monitoring how the government takes the recommendations forward, and shapes a modern workforce that is future proof.Date Published: 1 December 2016
Future World of Work and Rights of Workers Inquiry
The Taylor review on modern employment practices launched yesterday to look into the impact of changes to the labour market.
It was revealed last month that Mathew Taylor, Chief Executive of the Royal Society for the Arts, would lead the review to address questions on issues such as job security, wage levels and employees’ rights.
The Business, Energy and Industrial Strategy Committee launched a separate inquiry into workers’ rights in October, reflecting growing public concerns over the employment practices of “digital economy” companies, such as Deliveroo and Uber, and the use of zero hours contracts.
The panel members involved in the review were named as: Paul Broadbent, chief executive of the Gangmasters Licensing Authority; employment lawyer Diane Nicol; and Greg Marsh, who founded home letting company onefinestay.
The team has been appointed to lead a six-month review.Date Published: 2 November 2016
Future World of Work and Rights of Workers Inquiry
The Business, Energy and Industrial Strategy Committee has launched an inquiry into the future world of work, focussing on the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the ‘gig economy’. The inquiry also looks at issues such as low-pay and poor working conditions for people working in these non-traditional employee roles.
Scope of the Future World of Work and Rights of Workers Inquiry
The inquiry follows the Committee’s recent inquiry into working practices at Sports Direct and the Committee’s inquiry on the Digital Economy, which looked at the employment status of workers in the sharing economy.
The inquiry also follows recent news stories about working practices and the use of agency staff at Asos, concerns about couriers at Hermes, and growing questions around the status of those working in the ‘on-demand’ economy, for businesses such as Uber and Deliveroo.
Terms of Reference of the Future World of Work and Rights of Workers Inquiry
- Is the term ‘worker’ defined sufficiently clearly in law at present? If not, how should it be defined?
- What should be the status and rights of agency workers, casual workers, and the self-employed (including those working in the ‘gig economy’), for the purposes of tax, benefits and employment law?
- What specific provision should there be for the protection and support of agency workers and those who are not employees? Who should be responsible for such provision – the Government, the beneficiary of the work, a mutual, the individual themselves?
- What differences should there be between levels of Government support for the self-employed and for employees, for example over statutory sick pay, holiday pay, employee pensions, maternity pay?
- How should those rights be changed, to ensure fair protection for workers at work?
- What help should be offered in preparing those people who become self-employed (with, for example, financial, educational and legal advice), and who should be offering such help?
- Should there be steps taken to constrain the use by businesses of agency workers?
- What are the issues surrounding terms and conditions of employees, including the use of zero-hour contracts, definitions of flexible contracts, the role of the Low Pay Commission, and minimum wage enforcement?
- What is the role of trade unions in representing the self-employed and those not working in traditional employee roles?
What Happens Next?
The Committee are asking for written submissions by Monday 19 December 2016.
Evidence sessions will begin early in 2017.