Greater clarity on employment status?

The Taylor Review of Modern Working Practices “Good Work” was published this week. With 116 pages, there is a lot to consider. The Review, which considers in particular the issue of employment status, makes a number of proposals and recommendations with the overriding ambition that “all work in the UK economy should be fair and decent with realistic scope for development and fulfilment”. The recommendations focus broadly on three challenges:

tackling exploitation and the potential for exploitation at work;
increasing clarity in the law and helping people know and exercise their rights; and
over the longer term, aligning the incentives driving the nature of our labour market with our modern industrial strategy and broader national objectives.

Some of the recommendations are specific and can be implemented as soon as the Government is ready; others will require further consultation and consideration before implementation.

The review acknowledges that the difference between employees, workers and self-employed individuals and the different rights attaching to each status can be difficult to understand, which creates uncertainty for individuals and for employers. As the economy changes and new models of working emerge, there should be a balance between flexibility in the way that work is offered and carried out; and ensuring that individuals rights are protected.

Some of the main recommendations of the Review include:

Clearer legislation on the issue of employment status so that determining status is simpler, and individuals and employers have more information, a greater level of certainty and an understanding of which rights and responsibilities apply.
Ensuring that where individuals are under significant control in the way they work, they are not left unprotected as a result of the way their contract is drafted.
Introduction of a category of “dependent contractors” to refer to people who are eligible for “worker” rights but who are not employees. The status of “dependent contractor” should have a clearer definition, with the principle of “control” having greater importance when determining status, and less emphasis placed on the requirement to perform work personally.
Alignment of the employment status framework with the tax status framework to ensure that differences between the two systems are reduced to an absolute minimum.
Extension of the right to a written statement to “dependent contractors” as well as employees.
Providing access to an online tool that determines employment status in the majority of cases.
Tasking the Low Pay Commission with advising on the impact of bringing in a higher National Minimum Wage for hours which are not guaranteed in a contract. This new higher rate should be set at a level which incentivises employers to schedule guaranteed hours as far as reasonable within their business. For example, if an individual is on a contract which only guaranteed them 6 hours a week, but is regularly asked to work more than this, they should be entitled a new higher rate for any hours worked beyond 6 hours.
Allowing individuals the choice to be paid for their holiday entitlement in real time – known as “rolled-up” holiday pay. Dependent contractors would receive a 12.07% premium on their pay, resulting in someone on the National Living Wage of £7.50 receiving £8.41 an hour.
Creating a right for those on zero-hour contracts who have been in post for 12 months to request a contract that guarantees hours which better reflect the actual hours worked.
Ensuring individuals are able to get determination of their employment status in the Employment Tribunal without paying any fee. Employers will have the burden of proving that the individual is not entitled to the relevant employment rights.
Reform of Statutory Sick Pay so that it is explicitly a basic employment right, for which all workers are eligible regardless of income from day one.

Comment

The aim of providing clarity to employers and individuals on the issue of employment status is to be welcomed. However, a number of recommendations contain no real detail as to how they will be achieved. Clearer definitions are all well and good, but what will those definitions be? The recommendation of creating “dependent contractor” status has been well publicised, but it is unclear what would be achieved by renaming an existing category of individuals; and the result would be that various pieces of existing legislation that already refer to “workers” will need to be amended. This in itself could cause confusion and lead to further case law.

There is clearly still plenty of work to be done and, no doubt, there will be plenty of debate over the coming months. In the meantime, nothing has changed. It remains to be seen what the Government’s response to the recommendations to the Review will be and what, if any, changes to legislation will be put in place.

14 July 2017

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