Employment practices under review: the Prime Minister is to launch an independent review of employment practices in the modern economy

Written on 4 Oct 2016

Modern working practices regularly make the headlines in the UK, from zero hour contracts to the opportunities and challenges that the on-demand economy offers to and places on workers.

Theresa May has focused from the start of her Premiership on issues around the nature of modern employment, affirming her support for “ordinary people”; those who areworking around the clock”, but “don’t always have job security” and “worry about the cost of living”. Her promise to these individuals being that her government will do “everything.. to give you more control over your lives”.

“The growing army of people working in new ways”

The Prime Minister has now asked the Chief Executive of the RSA, Matthew Taylor, to lead an independent review into “how employment practices need to change in order to keep pace with modern business models”, and the growing army of people working in new ways (here).

It is recognised that modern business approaches can bring with them many benefits, particularly for those looking for or needing flexibility in their working arrangements. However, inadequate employment protection can leave vulnerable individuals open to abuse.

Six key themes

A press release from the RSA indicates that the review will address six key themes:

Security, pay and rights: To what extent do emerging business practices put pressure on the trade-off between flexible labour and benefits, such as higher pay or greater work availability, so that workers lose out in all dimensions? To what extent does the growth in non-standard forms of employment undermine the reach of policies like the National Living Wage, maternity and paternity rights, pensions auto-enrolment, sick pay, and holiday pay?

Progression and training: How can we facilitate and encourage professional development within the modern economy to the benefit of both employers and employees?

Finding the appropriate balance of rights and responsibilities for new business models: Do current definitions of employment status need to be updated to reflect new forms of working created by emerging business models, such as on-demand platforms?

Representation: Could we learn lessons from alternative forms of representation around the world, for example the Freelancers Union in New York which focuses on access to health insurance?

Opportunities for under-represented groups: How can we harness modern employment to create opportunities for groups currently under-represented in the labour market (the elderly, those with disabilities or care responsibilities)?

New business models: How can government – nationally or locally – support a diverse ecology of business models enhancing the choices available to investors, consumers and workers?

Interestingly, the tax status of workers does not seem to be part of the review. This may be a problem, given the concerns that tax authorities have with the idea of creating a “third way” of employment. That may be helpful in terms of clarifying the employment status of workers, but could cause further difficulties for tax authorities which are trying to stem the drift of people away from the (easy to collect) PAYE/NICs system. Will a new category of worker lead to a lower tax take as employers engage workers via platforms?

Haven’t we been here before?

There is an element here of déjà vu. 2014 saw the Department of Business, Innovation & Skills (now the Department of Business, Energy and Industrial Strategy) launch an “employment review” to improve the “clarity” and “status” of the British workforce (here). No formal response was published.

In 2015, in light of “changing work patterns” and “out-of-date mindsets”, the Office of Tax Simplification published its report on employment status from a
tax perspective (here), remarking that “employment status is a complex and wide-ranging subject that many have said has no real solution – and that if we did manage to “solve it”, we should immediately move on to world peace as we’d clearly be on a roll”. Indeed, it concluded, “as we anticipated when we set out, we have not found the tax equivalent of the philosopher’s stone that will suddenly transmute all the base problems into shining clarity”.

So, in 2016, is Matthew Taylor the one who will now find the solution?

Innovation v employment protection: will a happy compromise be achieved?

There does seem to be real momentum from Theresa May to review UK employment and working practices. September 2016 saw the launch of an inquiry into corporate governance and executive pay, which includes looking at putting workers onto company boards, as well as tackling excessive executive pay (here). Gender pay is also under review, with final regulations on what information an employer must publish on its gender pay gap expected to be published imminently (here).

The Prime Minister has also confirmed at the current Conservative party conference that on Brexit “existing workers’ rights will continue to be granted in law – and they will be guaranteed as long as I am Prime Minister”, a pledge reiterated by Brexit Minister David Davis in his speech (here). It is interesting that the Prime Minister has not ruled out extending the rights of workers or introducing new rights for those who are currently unprotected, should that be what is needed.

Will Theresa May be able to protect the “ordinary” person, whilst not antagonising businesses seeking to grow and thrive in a Brexit era? That remains to be seen. But it does feel like some real reform to address today’s modern workforce challenges may well be on the cards, even if one really difficult challenge will be the tax status of any new categories of workers, and the threat that poses to the Treasury.