The Taylor Review of Modern Working Practices (the Review) was published last week.
Commissioned by Theresa May shortly after she became Prime Minister last summer, the independent review examined how employment practices need to change in order to keep pace with modern business models, particularly those in the ‘gig economy’ to see if businesses were unfairly taking advantage of workers in this sector.
The review considered the implications of new forms of work, driven by digital platforms, for employee rights and responsibilities, employer freedoms and obligations, and our existing regulatory framework surrounding employment.
The results of the review make interesting reading but currently do not change the legal status or entitlements of these ‘gig economy’ workers. The report only produces a series of recommendations, and Parliament would need to pass legislation to bring these recommendations into legal force. Given that the Government is likely to have more pressing priorities in terms of Brexit, it may be some time before we understand whether these recommendations are going to become law, if at all.
What is the gig economy?
The ‘gig economy’ refers to businesses that operate by work being contracted out on a freelance basis to fulfil short term projects; businesses in the ‘gig economy’ often use technology such as mobile apps to connect workers with the end user.
Businesses such as Uber and Deliveroo, amongst many others, are regarded as operating in the ‘gig economy’.
These businesses characterise the individuals engaged by them as being ‘self-employed’, and therefore not entitled to receive holiday pay, sick pay or the NMW.
What recommendations does the report make?
The Review favours that the current three tier system of employee status (employee, worker and self-employed) should be retained, but recommends that ‘Worker’ should be renamed ‘Dependent Contractor’.
The Review also states there should be a clearer distinction between an ‘employee’ and ‘dependent contractor’, with a clearer definition of dependant contractors which better reflects the reality of modern working arrangements, properly capturing those more casual employment relationships that are on the increase today. The Review recommends that the absence of a requirement to work personally should not be an automatic barrier to accessing employment rights as a dependent contractor and suggests that the principle of ‘control’ should be of greater importance when determining dependent contractor status.
The review further recommends extending the right to dependent contractors to receive a written statement of basic terms and conditions including holiday pay, sick pay and pension on day one of their job and recommends introducing a standalone right for individuals to bring a claim for compensation if an employer fails to provide this.
The Review recommends changes to how the National Minimum Wage (NMW ) is calculated in order to preserve flexibility in the gig economy while at the same time providing dependent contractors in the gig economy with a fair rate of pay. Under the proposal, firms would not have to pay workers the minimum wage for every hour that they are, for example, logged onto a platform. Instead, the Review is recommending that the Government adapt the piece rate legislation for gig workers. This would mean that gig employers would be able to pay workers based on their output provided they could show that an average individual successfully earns the NMW with a 20% margin of error.
The Review also recommends the development of an online tool to provide an indication of employment status similar to HMRC’s online tool for tax status.
Casual Workers/Zero Hours
The Review recognised that casual and zero hours contracts allow flexibility for both the employer and the individual but the Review recommends steps the Government can take to ensure that the flexibility of the arrangement does not unreasonably favour the employer at the expense of the individual. The Review made recommendations on this, including:
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.
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 rules around continuous service should be relaxed to allow zero hours workers the chance to accrue employment protections. The Review recommends increasing the maximum gap between work assignments which will not break continuity of employment from one week to one month.
In respect of holiday pay, the Government should increase the pay “reference period” used to calculate holiday pay for such workers from 12 to 52 weeks to take account of seasonal variations in casual and zero hours work. 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
The Review states that access to a basic level of income replacement when a worker is unable to work through illness should be part of a core set of employment rights. The Review recommends that 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 one, payable by the employer and accrued on length of service.
The Review says that employers should do more to support workers who are absent on long-term sickness grounds to return to work and employers should go “above and beyond” the duty to make reasonable adjustments.
The Review 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.
The Review 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 Review also recommends removing the so-called ‘Swedish derogation’ from the agency workers regulations, which allows agencies to avoid matching end user pay by employing agency workers in a way that allows for pay between assignments.
Family-friendly rights and flexible working
The Review recommends that the Government should review and consolidate guidance on pregnancy and maternity discrimination to enable women to more easily spot unlawful discrimination and challenge it.
The Review recommends that the Government, as part of its evaluation of the flexible working scheme in 2019, should 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.
Enforcement and employment tribunals
The Review recommends:
HMRC should be given responsibility for enforcing National Minimum Wage, sick pay and holiday pay rights for the lowest paid workers.
That the burden of proof in hearings where employment status is in dispute should be reversed and placed upon the employer. This proposal means that if an individual brings a claim that requires them to be an employee, or a worker, it would be for the employer to prove that they are not. The review also 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 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.
HMRC should also take enforcement action to stamp out unpaid internships.
Transparency and reporting
The Review recommends that the Government should introduce new duties on employers to report (and to bring to the attention of the workforce) certain information on workforce structure. 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 number agreed to) from zero hours contract workers for fixed hours after a certain period;
Report on the number of requests received and agreed from agency workers for permanent positions with a hirer after a certain period.
No detail is offered as to what size the threshold would be.
What should we do now?
Given that the report does not change the law as it currently stands, there is no immediate urgency to take any action. However, bearing in mind the recommendations made by the report, businesses operating in the gig economy, and those engaging workers on zero hours contracts, might wish to conduct audits of their working arrangements to see how these recommendations might affect their businesses. Equally, it may be prudent to establish contingency funds or conduct a risk analysis of potential claims in the event that you consider that there could be a risk that any current individuals engaged by you could properly be classified as “workers” under the current law.
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