The last month has seen a lot of comment about how the law needs to change in order better to protect (and tax!) so-called gig workers and other contingent workers. Clearly Matthew Taylor’s imminent report and Theresa May’s proposed 11 point plan are part of this, but there are many other developments.
The proposed changes may affect platform workers, traditional agency workers and other contingent workers – the term “zero hours worker” covers a wide range of workers. This is all linked to a wider debate about the “future of work” in most developed economies.
We have been involved in the Matthew Taylor Review and many of the other recent discussions and consultations relating to the future of work, perceived exploitation of gig workers and feared loss of tax-take associated with the rise in (false) self-employment. As an international law firm we have tracked how policy makers in other parts of the world are responding to the same issues. Many are clearly linking the view that the recent rise in political populism with perceived voter anger relating to the increasing casualisation of jobs and associated precariousness of incomes.
There are very few details about exactly how these proposals will work, and obviously it is impossible to say for sure which ones will become law, but these are some of our predictions of the most likely developments in the next year or so:
1. New rules about zero hours working, including agency and platform working
“Zero hours” is a term that is often used by politicians and the media to describe working arrangements with which they link a range of societal issues. Some aspects of zero hours working can be exploitative; others are clearly not. Broadly speaking it’s a term used to describe engagements of workers (directly or via staffing companies or online platforms) on a “when we need you and as long as we need you” basis, with no commitment to provide paid for work on a regular basis over time (part time or full time). It is not unlawful, and there is so far only limited legislation specifically about it.
Will there be limits on when employers can use zero hours workers?
The UK election has seen proposals for a total ban on zero hours contracts. In Ireland there are proposals to limit the use of zero hours contracts to genuinely “temp” situations. We believe this sort of sweeping reform (which would impact most traditional agency workers as well as platform workers) is unlikely to happen in the UK in the foreseeable future.
Will zero hours workers have the right to request guaranteed hours or fixed term contracts?
The Taylor Review has suggested that this will happen. If so employers, staffing companies and online platforms will need to review how to supply/use zero hours workers, consider offering guaranteed hours/fixed term arrangements where circumstances allow, and be able to justify when they propose to continue with “when we need you and as long as we need you” arrangements.
Will zero hours workers have maternity/paternity rights?
A consultation about this has been firmly proposed by Theresa May. It is hard to see exactly how the granting of these rights could work in a typical gig or agency working situation and we consider that it may take some time to iron out the details of this proposal.
Intermediaries and hirers will need to think about how to offer at least some of their zero hour workers guaranteed regular work. Zero hours workers will be given some new rights. Online platforms and staffing companies will have to consider carefully the impact of this on their business models. We may see staffing companies try to offer regular work by moving further towards an outsourcing model including the provision of whole teams or shifts in certain industries (which can at the same time offer tax benefits).
2. Impact of AI and robotics on jobs and incomes
Will there be enhanced consultation rights for those at risk of redundancy as a result of increased use of AI/robotics?
This has been proposed in France and elsewhere but we do not expect the UK to introduce legislation on this in the near future.
Will there be increased rights to training/retraining for those whose careers are likely to be affected (which means most of us)?
We consider this to be more likely to happen in the UK, with many politicians and policy makers keen not to leave affected workforces on the scrapheap. And it may be that contingent workers will have rights to be trained as well. We may see online platforms and staffing companies partnering with training companies and offering various types of online and traditional support for employees and agency workers.
Willl there be a tax on use of AI and robotics to minimise the pace of social disruption?
This idea, which has received high-profile support from the like of Bill Gates, is not likely to happen in the UK in the near future.
Many intermediaries will increasingly need to offer training, perhaps via training partners. Staffing companies and platforms should start planning how they can facilitate training and access state funding for training, starting with the Apprenticeship Levy but going well beyond that as training funding and obligations grow.
3. Employment status of gig workers
Will there be measures to make it easier for individuals to bring employment or worker-status claims against hirers, platforms and intermediaries? Will claims be more likely?
We consider this a likely development. Possible measures that could be introduced include: reversing the burden of proof so that platform/hirer has to prove the individual does not have employment/worker rights; abolishing tribunal fees for those who try to assert their rights, an obligation on hirers/platforms to issue very clear statements to workers about what rights they do and don’t have; or the introduction of an online employment status tool and/or fast-track tribunal procedure for those wanting to claim employment or worker rights.
Clearly, this would greatly increase the risk for hirers, staffing companies and platforms of treating workers (for holiday pay, national living wage, pensions, tax and NICs other purposes) as self-employed. Either the costs of using relevant workers will go up or engagement models would have to change so that the relevant assignments involve genuine self-employment.
The Taylor Review has also raised the possibility of changing the employment status test in law to focus more on “control” than “personal service,” but we consider that unlikely to happen imminently or at all.
Some commentators have suggested “are you paid more than £x per hour” and/or “do you work more than y hours per week via platforms” tests for the purposes of assessing when employment status or worker status will be the default option. This seems unlikely to be the way legislation will be framed in the UK for the time being.
Will there be clarification of what rights gig workers have during “waiting time”?
This would not be straightforward. It is not easy to identify who should be responsible for paying national minimum wage when a gig worker has made him or herself available for gigs via more than one platform at the same time.
There will be more status cases by lower paid workers claiming extra rights. The employment/worker status “test” will continue to revolve around the age old issues of (i) control as to how work is done and (ii) whether there is an obligation to provide personal service. However something is likely to be done to make it procedurally easier for platform and agency workers to establish employment or worker status, and claim associated rights to national minimum wage, holiday pay and the like. Hirers, platforms and staffing companies may face increased costs relating to some of the “grey area” workers they currently engage on a self-employed basis. Ultimately, however, we think it unlikely that actual or perceived abuses of more vulnerable work-seekers will be eradicated until end users are made liable on some sort of chain-liability basis.
4. Further attacks on perceived tax avoidance in the staffing supply chain and gig economy
Will total NICs in self-employment situations be increased to match the rates for employment situations?
This seems very likely to happen at some stage and will, at many pay rates, materially reduce the tax/NICs attractiveness of working on a self-employed basis.
Will platforms and staffing companies be obliged to pay via a third party platform, through which payments can be logged (taxed), or at least be obliged to report all payments to HMRC?
Some policy makers and academics are attracted to this and there has been a recent HMRC consultation about giving online platforms obligations to report (with staffing companies already having some reporting obligations under the 2014 Intermediaries Legislation). We consider that in the medium term there may be a move towards increased reporting obligations or perhaps an obligation to make all payments to platform workers, self-employed workers and agency workers via a state-regulated or licenced group of “approved” payment intermediaries who can make assessments as to tax status and apply PAYE, NICs, Apprenticeship Levy, pension payments and the like accordingly.
Will platforms and agencies be obliged to make fixed deductions (without having to assess employment status), akin to the way the CIS regime operates in construction?
This seems less likely, although it was clearly at one stage the favoured option of the Office of Tax Simplification.
Will there be an extension to the private sector of the recent IR35 changes in the public sector?
Many commentators consider that this is inevitable, so that platform and staffing companies will be liable for the PAYE and NICs relating to all workers who operate via personal service companies but who fail the so-called IR35 test (for which HMRC has now introduced an online test). This may happen as early as April 2018 (assuming HMRC has time to prepare for that given all the other things on its plate) or failing that April 2019.
Hirers, staffing companies and platforms will start having to manage tax risks more carefully in 2017/8, Statement of Work (SOW) supplies will increase, and some umbrellas may end up being Government sponsored! At some stage we expect an independent but licensed industry of payment intermediaries to operate alongside online platforms and staffing companies and take responsibility for tax and NICs status and accounting for tax and NICs.
Will ex-umbrella companies lead the way on this or will big US-style “Professional Employer Companies” or the like dominate?
The licensing regime may go well beyond simple FCA authorisation for the purposes of the Payment Services Directive and cover suitability issues relating to tax collection and status assessment. Not least because of the tax liabilities intermediaries and hirers may otherwise face (and concerns that investors in intermediaries will have if these tax risks are not dealt with), those who wish to hire or supply workers on a self-employed basis will increasingly do so on a “genuine” business-to-business basis. This may lead to further growth in use of SOW / “fixed price for defined deliverable” contracts by intermediaries, with some staffing companies moving towards a consultancy/outsourcing model.
5. Changes to the Agency Workers Regulations
A complete repeal of the Agency Workers Regulations (AWR) seems very unlikely, even after Brexit. Theresa May has promised not to use Brexit as an opportunity to roll back workers’ rights.
Whether there will be tweaks to the regime is less clear. The Taylor Review has focussed on the possible withdrawal of the so-called “Swedish Derogation” because of alleged abuses in certain industries. (The Derogation disapplies equal pay rights for agency workers provided they are employed between engagements).
If new laws are introduced relating to zero hours workers such that at least some of them are offered regular work, hirers and intermediaries will need to get their heads around a potentially complex interplay between the Fixed Term Employees Regulations, AWR, and new zero hours laws.
No major change to AWR other than possible abolition of the Swedish Derogation.
6. Increased regulatory focus on online staffing platforms and staffing companies
One area of debate in recent years has been whether intermediaries in the world of gig working and agency working should be subject to a licensing or tighter regulatory regime, with a regulator like the Gangmasters Licensing Authority having extended powers.
Bubbling along for many years has been the issue of whether online platforms are “employment agencies” under UK recruitment regulation (the Employment Agencies Act (EAA) and Conduct Regulations). If they are then that curtails their ability to charge for certain services and act as a payment intermediary. There have been three consultations by BEIS and its predecessors on this point but the statutory definitions still seem (in the view of BEIS) to capture some online platform activities. With the increasing focus on the role in society of online platforms will the UK regulators step up efforts to enforce the relevant laws against online platforms? The relevant current laws have criminal sanctions so breach is a serious matter.
Linked to this is the imminent Payment Services Directive 2 which regulates how platforms and other introducers can act as payment intermediaries.
And the General Data Protection Regulation (GDPR) will be in force in May 2018. In the lead-up to this staffing companies and online platforms will, given the huge new penalties, need to carry out a significant review of how they process and share data, and establish the legal right to do so under the much tighter new rules.
All these measures are associated with very serious penalties including criminal law sanctions. If they fail to comply, platforms could face far more serious liabilities than a few employment tribunal awards.
The GDPR will be a major business issue for all. Even if a general regulator (like the GLA) is not appointed (which we doubt will happen in the foreseeable future except in very limited subsectors), general regulatory compliance will become a much more important issue for online platforms (and traditional staffing companies) in the next few years. Some may need to adjust their commercial models to cope with GDPR and EAA issues.
Along with all of these issues, clearly Brexit has the potential to have a major impact on staffing companies and platforms. We will cover the impact of Brexit, including the effect on immigration and related problems with access to candidates, in separate briefings.
Debate will continue about all these topics and there is no way of knowing for certain whether all of our predictions will come to pass in what is a rapidly evolving political landscape. But we are sure there will be a number of important changes in the next year or two, and they will affect the attractiveness and value of all staffing companies and intermediaries looking for investment or moving towards a sale.
Despite all of this change, though, it seems to us unlikely that this will reduce future usage of agency workers and online staffing platforms. The economies and efficiencies they offer to hirers in what may turn out to be an uncertain economic climate, and the opportunities only they offer to many people will ensure they continue to thrive, albeit in some cases with adjusted commercial models.
We are helping countless businesses prepare for all of the issues discussed in this article through our Future of Work initiative (see more here). If you would like to understand how we can help your business, please contact one of our experts below or your usual Osborne Clarke contact.