Government responds to Taylor Review and the changing world of work – what do the proposals mean for employers?

Written on 7 Feb 2018

The government has announced that it is ‘taking forward’ (and in some cases completely accepting) all but one of the recommendations made in the Taylor Review, an independent report published last year which investigated the impact modern working practices are having on the world of work.  It also picks up recommendations set out in the joint report of the  Work and Pensions and Business, Energy and Industrial Strategy Select Committees.   The government plans to ‘go further’ than the review’s proposals in a number of respects, including a right for all workers to be given a list of day-one rights, including holiday and sick pay entitlements and the right to a payslip; and a right for all workers to request more stable employment contracts.

Matthew Taylor, author of the original review, has called the government’s response ‘substantive and comprehensive’.

A clearer focus on the quality of work

Recognising the need for a clearer focus on the quality of work, as called for by Matthew Taylor, the government’s press release confirms that it will become ‘accountable for good quality work’ as well as quantity of jobs; a key ambition of the UK’s Industrial Strategy.  The government is adopting a three pronged attack, ensuring: that workers know their rights; that they receive the benefits and protections they are entitled to; and that action is taken against employers who breach workers’ rights.

Measures the government has highlighted in its announcement, reinforcing and building on the recommendations in the Taylor Review and the joint report of the Work and Pensions and Business, Energy and Industrial Strategy Select Committees, include:

  • a list of day-one rights, including holiday and sick pay entitlements and a new right to a payslip for all workers, including casual and zero-hour workers. Agency workers will also be provided with a clear breakdown of who pays them and any costs or charges deducted from their wages. This is designed in part to reduce confusion which many workers have about who they are engaged by, and what rights they have, when working via some of the more complicated gig economy and umbrella company arrangements that have proliferated in the last few years;
  • proposals for a new category of dependent contractor, simplified employment status test based on control, together with a reversal of the burden of proof (such that employers have to prove the workers are not “employees”), and abolition of tribunal fees for workers trying to claim employment status. Reversing the burden of proof in status claims would present many users of gig workers and other contingent workers with some problems. Such a measure in the 2014 intermediaries tax regime has been instrumental in closing down a number of “Sole Trader” tax avoidance arrangements;
  • a right for all workers, not just zero-hour and agency workers, to request a more stable contract, providing more financial security for those on flexible contracts  (such that workers who regularly work a certain number of hours over 12 months can claim a right to such hours, and workers on site at a hirer for more than 12 months can request a direct contract of employment with the hirer – each of which proposals could have a substantial impact on major users and suppliers of agency workers);
  • asking the Low Pay Commission to consider the impact of higher minimum wage rates for workers on zero-hour contracts;
  • considering repealing laws allowing agencies to employ workers on cheaper rates (in other words the so-called ‘Swedish Derogation’ from the Agency Workers Directive);
  • taking action to ensure unpaid interns are not doing the job of a worker;
  • proposals to enforce vulnerable workers’ holiday and sick pay for the first time, with HMRC having enforcement powers (as is the case already with the National Minimum Wage (NMW));
  • introducing a new naming scheme for employers who fail to pay employment tribunal awards;
  • possible regulation by the Employment Agency Standards Inspectorate of employment intermediaries including umbrella companies and of compliance with equal pay rights under the Agency Workers Regulations;
  • proposals to accredit payment intermediaries tasked with ensuring payment of “the right tax” when working through platforms etc;
  • clarity about what exactly will count as ‘working time’ to which NMW applies;
  • requiring “employers” to report regularly about the types of employment models they use (which may include self-employment, zero hours and umbrella models); and
  • quadrupling employment tribunal fines for employers showing malice, spite or gross oversight to £20,000 and considering increasing penalties for employers who have previously lost similar cases. 

The government is also seeking to raise awareness of existing rights in the business environment, with plans to:

  • launch a task force with business to promote awareness and take-up of the existing statutory right to request flexible working;
  • make sure new and expectant mothers know their workplace rights and raise awareness amongst employers of their obligations; and
  • launch a new campaign to encourage more working parents to share childcare through the existing right to shared parental leave.

The announcement also confirms the government’s existing commitment that workers receive the right to the NMW reaffirming its National Minimum and Living Wage Campaign which seeks to drive awareness and compliance and that this year it will spend a record £25.3m on minimum wage enforcement.

What was rejected from Taylor?

As was widely predicted, the government has rejected the proposal in the Taylor review to reduce the difference between the National Insurance contributions (NICs) of employees and the self-employed following the 2016 Budget.  Changes to rates of tax or NICs for employees or self-employed are not in the scope of the reforms the government is considering.

So will “millions… benefit from enhanced rights”?

Potentially – but the real impact on the individual worker will be subject to the following four consultations which the government has launched today:

  • enforcement of employment rights recommendations;
  • agency worker recommendations;
  • measures to increase transparency in the UK labour market; and
  • employment status – which will examine options, including new legislation to make it easier for both the workforce and businesses to understand whether someone is an employee, worker or self-employed and to determine the rights and tax obligations which apply to them. The government has also indicated that it “will work with industry to consider ways of encouraging the development of online tools for self-employed people to come together and discuss the issues that are affecting them”.

It will be the analysis of the content of these consultations and the responses to them which will be key in understanding how the government intends to deliver on Taylor.

What is the timescale for reform?

No specific timescales have been set and there has been some immediate criticism by commentators of the government’s announcing more consultation, meaning that these changes will not come into effect for some time. However it should be noted that in areas like employment status, action to change the law would require new legislation to be put before Parliament, rather than instant government action.

It does seem likely though that, given the backdrop of Brexit and the potential skills gap which was highlighted in the Autumn budget, Theresa May will try to push these recommendations up the agenda – although legislative reform on the more complex areas may well suffer from Brexit itself dominating the legislative agenda in the next year or so.  The reforms are a vital part of the Industrial Strategy, the government’s long term plan to build a Britain fit for the future by helping businesses create better, higher-paying jobs in every part of the UK. Indeed, the government states that it sees itself at the forefront of tackling the issues the modern world of work gives rise to, seeing the UK as being “one of the first countries to address the challenges of the changing world of work in the modern economy” and preparing employment rules to reflect the new challenges. With the complexities of Brexit, rights to free movement and trade deals lurking behind her, perhaps this is one small step to showing domestically and internationally that the UK remains open for business.

What can you do now?

Employers should not use the consultations announced today as an excuse to put the government’s Good Work agenda in the ‘wait and see’ box, instead taking stock now of how the government’s agenda, together with any findings coming out from their work on the gender pay gap, reflects on their current workplace practices. The government announcement confirms that ‘quality work’ will be considered by the government when agreeing new sector deals with industry, encouraging employers to show how they are investing in their workforces to improve productivity.  Indeed, particularly around some of the softer initiatives, supporting awareness of flexible working, maternity and shared parental leave rights, it may be appropriate to consider whether there are any steps that could be taken now to reflect the current direction of travel.