‘Good Work’ – The Taylor Review of Employment Practices

In October 2016, the Prime Minister commissioned Matthew Taylor, Chief Executive of the Royal Society for the Encouragement of Arts, Manufactures and Commerce and a former policy chief to Tony Blair, to look at how employment practices need to change in order to keep pace with modern business needs.

The Review, entitled ‘Good Work’, has now been published and makes many recommendations. These focus broadly on three challenges:

1. Tackling exploitation and the potential for exploitation at work;
2. Increasing clarity in the law and helping people know and exercise their rights; and
3. Over the longer term, aligning the incentives driving the nature of our labour market with our modern industrial strategy and broader national objectives.

The Review supports maintaining the flexible and adaptable approach to labour market regulation that has benefited the UK so far, while focusing more closely on the quality of work as well as the number of people employed.

Whilst some of the recommendations are very specific and could easily be implemented, others are broader, although based on clear principles, and would require further consultation and consideration before implementation. Some are long term and strategic, indicating policy aims rather than prescribing in detail how to achieve them.

The report makes the following recommendations:

• The National Living Wage, whilst a powerful tool to raise the financial baseline of low-paid workers, should be accompanied by strategies to ensure that people are not stuck at that level of pay but can progress in their current and future work;
• The status of ‘worker’ – i.e. those people who are eligible for worker rights but who are not employees – should be retained but renamed ‘dependent contractor’, with a clearer distinction drawn between the rights of employees, dependent contractors and those who are legitimately self-employed;
• In order to make determining employment status simpler, the key principles of the tests for employment status should be set out in primary legislation, with secondary legislation and guidance used to provide more detail;
• Where individuals are subject to significant control in the way they work, they should not be left unprotected as a result of the way their contract is drafted. The Government should therefore ensure that the absence of a requirement to perform work personally is no longer an automatic barrier to accessing basic employment rights;
• In developing the test for the new dependent contractor status, control should be of greater importance, with less emphasis placed on the requirement to perform work personally;
• Redefining worker status should not impact on those for whom the current system works well. Legislation should therefore continue to ensure that ’employees’ remain as those individuals who work under a ‘contract of employment’. In such cases, the requirement to do work personally is well established and still relevant;
• The Government should adapt the piece rates legislation to ensure that those working in the gig economy are still able to enjoy maximum flexibility whilst also being able to earn the National Minimum Wage (NMW);
• In developing the dependent contractor test, an attempt should be made to align the employment status framework with the tax status framework to ensure that differences between the two systems are reduced to an absolute minimum;
• Employers should be required to issue a written statement of employment particulars to all workers, not just employees, on day one of their employment so that they are better informed about their rights and obligations. The statement should include a description of the individual’s statutory rights;
• The Government should also consider introducing a stand-alone right for individuals to bring a claim for compensation if an employer does not provide a written statement of employment particulars. Currently, the right to claim compensation when an employer fails to do so only applies if the employee has successfully brought another substantive claim;
• The Government should build on legislative changes to further improve clarity and understanding by providing individuals and employers with access to an online tool that determines employment status in the majority of cases, similar to the Employment Status Indicator tool for tax purposes;
• To ensure that flexibility does not benefit only the employer, at the unreasonable expense of the worker, the Government should ask the Low Pay Commission to advise on the impact of bringing in a higher NMW for hours which are not guaranteed as part of the contract. This should be set at a level which would incentivise employers to schedule guaranteed hours as far as reasonable within their business. In addition, consideration should be given to other ways in which employers might be encouraged to guarantee more hours to their staff, including the role of voluntary collective agreements;
• The Government should extend, from one week to one month, the length of the temporary cessation of work between assignments that is allowed when calculating the period of continuous service that certain employment rights demand, and clarify the situations where cessations of work could be justified;
• The Government should amend the legislation on what information needs to be provided to agency workers before they accept an assignment in order to improve transparency, both in terms of rates of pay and who is responsible for paying their salary;
• The Government should do more to promote awareness of holiday pay entitlements and increase the pay reference period from 12 weeks to 52 weeks in order to take account of seasonal variations. Dependent contractors should also be given the opportunity to receive rolled-up holiday pay, provided safeguards are in place to ensure they do not go without holiday leave;
• Those on zero-hours contracts should be given the right to request guaranteed hours after one year;
• Agency workers should be given the right to request a direct contract of employment after 12 months working for the same hirer and hirers should be under a duty to consider the request in a reasonable manner;
• The Government should examine the effectiveness of the Information and Consultation Regulations 2004 in improving employee engagement in the workplace. In particular, it should extend the Regulations to include employees and workers and reduce the threshold for triggering the requirement to inform and consult from 10 per cent to 2 per cent of the workforce making the request. In addition, the Government should work with Investors in People, The Advisory, Conciliation and Arbitration Service, trade unions and others to promote further the development of better employee engagement and workforce relations, especially in sectors with significant levels of casual employment;
• The Government should actively support technology that would ensure that self-employed people have the opportunity to come together and discuss the issues that are affecting them, working with employers to make sure this is positively encouraged;
• The Government should require companies beyond a certain size to make public their model of employment and use of agency services beyond a certain threshold, report on how many requests for fixed hours they have received (and the number agreed to) from workers on zero-hours contracts after a certain period and report on how many requests they have received (and the number agreed) from agency workers for permanent positions within the company after a certain period;
• The Government should repeal Section 10 of the Agency Workers Regulations 2010 (AWR), which allows agency workers to sign a type of employment contract with their recruitment agency whereby they opt out of equal pay entitlements in return for some guaranteed pay between work assignments. In addition, the Government should consider extending the remit of the Employment Agency Standards Inspectorate to include compliance with the AWR;
• HM Revenue and Customs (HMRC) currently enforce payment of both the NMW and Statutory Sick Pay (SSP). The report proposes that HMRC should also take responsibility for enforcing the payment of holiday pay for the lowest-paid workers, so that workers do not have to pursue what are often lengthy claims at the Employment Tribunal (ET). Going forward, the Government should consider whether other pay-based protections, such as the protection against unlawful deductions from salary, should also be enforced by the state for the lowest-paid workers;
• For employment rights claims that are dependent on a claimant’s employment status, individuals should be able to obtain an authoritative determination of their status at an expedited preliminary ET hearing;
• The burden of proof in ET hearings should be reversed so that the employer has to demonstrate that the individual is not entitled to the relevant employment rights;
• The Government should make enforcing the payment of ET awards simpler for employees and workers by taking action against employers who fail to comply. In addition, employers who do not pay ET awards within a reasonable time should be named and shamed;
• To punish employers who believe they can ignore the law and to act as a future deterrent, the Government should create an obligation on ETs to consider the use of aggravated breach penalties and costs orders where an employer has already lost an employment status case on broadly comparable facts. In addition, ETs should be allowed to award uplifts in compensation if there are subsequent breaches against workers with the same or materially the same working arrangements;
• To further promote flexible working, the Government should consider whether temporary changes to employment contracts might be allowed in order to accommodate flexibility needed for a particular caring requirement;
• SSP should be reformed so that it is explicitly a basic employment right, comparable to the NMW, for which all workers are eligible regardless of income from day one;
• A similar approach to a woman’s return to work after having a child should be adopted for sick leave, with individuals having the right to return to the same or a similar job after a period of prolonged ill health. This right should be conditional on the individual’s engagement with the Fit for Work Service;
• The Government should ensure that exploitative unpaid internships, which damage social mobility in the UK, are stamped out. This could be achieved by clarifying the interpretation of the law and encouraging enforcement action by HMRC in this area;
• The Government should examine ways in which the tax system might address the disparity between the level of tax applied to employed and self-employed labour;
• If National Insurance Contributions (NICs) for self-employed persons are increased, there should be a corresponding increase in areas of entitlement – particularly in respect of parental leave;
• The review believes that there is a case for moving to a more equal tax treatment of self-employment over time, and it follows that there is a case for companies and others who engage self-employed labour to contribute more to the overall NICs of the self-employed, in the same way as they do for employees;
• The Government should continue to work with providers to ensure that self-employed people have access to online tools that support compliance with the principles of Making Tax Digital, even if they do not meet the minimum statutory threshold; and
• Consideration should be given to accrediting a range of platforms designed to support the move towards more cashless transactions. This would make it more difficult for people to participate in the ‘informal economy’, whether intentionally or otherwise. Moving over time to cashless Government-accredited platforms for the payment of self-employed labour would shift the default position significantly, meaning only those who intended to avoid their obligations would fail to pay the correct tax.

The 116-page report, ‘Good Work: The Taylor Review of Modern Working Practices’, can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/626772/good-work-taylor-review-modern-working-practices.pdf.

This article is provided for general interest and information only.  It does not constitute legal advice. Whilst every effort is made to ensure that the content accurately reflects the law in England as at the date of its transmission, no liability is accepted for any loss or damage arising from any act or omission resulting from any