Taylor Review Good Work Report Published

The Taylor Review of Modern Workplace Practices (the Good Work Report) has made a number of proposals for clarifying the law surrounding employment status and recommendations for changes to the scope of various employment protections. The Review is wide-ranging in scope but in this Update we focus on its recommendations for increasing clarity in the law and helping people to know and exercise their rights.  

Employment status

The Review notes that currently the main factors governing whether or not someone is an employee are personal service, control, mutuality of obligation and whether the person is carrying on a business undertaking.  These originate from case law.  It recommends that if the Government considers that these factors still remain relevant then it should update the legislation to reflect this.  To improve clarity on employment status, it should be legislation rather than the courts which plays the greater role.    

The Review rejects the suggestion that there should be only two types of employment status (employed and self-employed).  Instead, it recommends that we keep the current three-tier approach (employee, worker and self-employed) but that the term “worker” should be replaced with “dependent contractor” and cover those who are eligible for worker rights but who are not employees with “employee” rights. Dependent contractor status should not be restricted to those who perform work personally and instead, the focus should be on control, with legislation outlining what this means in today’s modern labour market (and not simply in terms of supervision of day to day activities).  The Review considers that this will result in more people being protected by employment law and make it harder for employers to “hide behind” substitution-type clauses.

Impact on the gig economy

The Review recognises that many workers in the gig economy appreciate “genuine two-way flexibility” and its proposals should not jeopardise this.   However, it recognises that some changes to employment law will be needed.  For example, the definition of what constitutes working time for National Minimum Wage purposes would need to be adapted so that gig workers cannot simply log on to an app when they know there is no work available and expect to be paid.   It recommends that the piece rates provisions of the National Minimum Wage legislation should be adapted so that workers allocated work though an app are viewed as undertaking a form of output work. 

Aligning tax and employment law

The Review recommends that the definition of self-employment for employment law and tax purposes should be aligned so that being employed for tax purposes would mean that the individual is either an employee or a dependent contractor.  In addition, tax and employment tribunal rulings on employment status should apply across both tribunals.

Scope of employment protections 

The Report makes a number of recommendations for improving employment protections including: 

• Dependent contractors should have the right to a written statement of their terms at the start of their engagement (including details of their day 1 statutory rights), with a standalone right to compensation if their employer fails to comply;
• Statutory Sick Pay should not be restricted to employees and should instead be a basic employment right. However, the right should accrue with service so that employers do not have to pay the full six months of SSP to individuals who have only worked for them for a short period of time;
• Those returning from long term sick leave should have the right to return to the same or a similar job;
• The rules on continuity of employment should be changed so that continuity of service is only broken by a break in service of a month, rather than a week and the circumstances in which a gap in service will not break continuity of employment should be clarified; 
• Consideration should be given to introducing a higher National Minimum Wage for hours which are not guaranteed, so that businesses can continue to use zero-hours and short-hours workers but be required to pay for their flexibility;        
• The pay reference period for holiday pay purposes should be increased from 12 to 52 weeks in order to improve access to holiday pay for seasonal, casual and zero-hours workers; 
• Individuals should be able to choose to receive “rolled-up” holiday pay.  The Review calculates that holiday pay is worth a 12.07% premium on pay, so a person earning the National Living Wage of £7.50 per hour could choose to receive a rolled-up rate of £8.41, instead of paid time off;
• Agency workers should have the right to request a direct contract of employment after 12 months’ employment with the same hirer and the hirer would have to consider the request in a reasonable manner;
• Zero-hours workers should be entitled to request guaranteed hours after 12 months, reflecting the actual hours worked;
• The “Swedish derogation” in the Agency worker Regulations 2010 should be abolished.  Under the derogation, workers who have a contract that provides for a minimum level of pay between assignments are excluded from the right to equal pay with permanent employees;
• Companies and public bodies should be required to report on the use of zero-hours and short-hours contracts and agency work in annual reports, including in their supply chains; 
• In order to improve employee engagement, the Information and Consultation of Employees Regulations 2004 should be widened so that employers must enter into negotiations for establishing works councils where 2% of the workforce (both employees and dependent contractors) request it.  Currently employers employing 50 or more employees only have to enter into negotiations where 10% of employees request it;
• In order to tackle pregnancy and maternity discrimination, the Government should review and, in any event, consolidate in one place guidance on the legislation so as to bring clarity to both employers and employees.  It should also consider further options for legislative intervention and if improvements in information and advice do not drive the required culture change, it should move quickly to more directive measures to prevent pregnancy and maternity discrimination.  

Enforcing employment rights

The Review makes a number of recommendations for improving enforcement of employment rights including that:

• HMRC should be responsible for enforcing the right to holiday pay for low-paid workers;
• Individuals should be able to have their employment status determined by an employment tribunal without paying an employment tribunal fee and the burden of proof should be on the employer to show that the individual does not have the status claimed;
• The Government should make the process of enforcing employment tribunal awards simpler by taking enforcement action itself;  
• Employers who fail to pay employment tribunal awards within a reasonable time should be named and shamed; 
• Tribunals should impose penalties for aggravated breaches and costs orders if an employer has already lost an employment status case on broadly comparable facts; and 
• Tribunals should be able to award uplifts in compensation where there are subsequent breaches against workers with the same or materially the same working arrangements.

What happens next?

The Government will now discuss the Report with stakeholders representing both employers and employees, ahead of publishing a full response later this year.  However, given the current political climate it seems unlikely that we will see any sudden and radical changes.  

You can view the Good Work Report here.