The Taylor review: What employers need to know
The long-awaited Taylor review of modern employment practices emerged today, introduced at a press conference hosted by Prime Minister Theresa May, who promised to look at its recommendations "very carefully and seriously".
Launching the review, author Matthew Taylor, chief executive of the RSA and a former adviser to Tony Blair, said: "Our national performance on the quantity of work is strong. But quantity alone is not enough for a thriving economy and fair society. We believe now is the time to complement that commitment to creating jobs with the goal of creating better jobs.
"The review calls on the Government to adopt the ambition that all work should be fair and decent with scope for fulfilment and development.
"Despite the impact of the national living wage and tax credits, there will always be people who are in work but finding it hard to make ends meet. Our social contract with those people should include dignity at work and the realistic scope to progress in the labour market."
However, the report has been widely criticised by trade unions and employment lawyers, who claim it does not go far enough to extend rights and protections for "gig economy" or atypical workers.
The review calls for a "significant shift in the quality of work in the UK economy" and makes a significant number of recommendations for how employment law could adapt to support this.
It adds that there are three key challenges UK employers and policy makers need to address, namely:
- tackling exploitation and the potential for exploitation at work;
- increasing clarity in the law and helping people know their rights; and
- aligning the labour market in the longer term with broader industrial strategy.
Among the headline recommendations made by the report are a proposal that the current status of "worker" is renamed "dependent contractor" and individuals who fall into this category should receive employment protections, and that those who "control and supervise" their workers should pay a range of benefits, including national insurance.
Taylor also proposes increases to national minimum wage rates for those who have non-guaranteed hours and rights for agency or zero hours workers to request fixed-hour contracts after a certain times.
We highlight the key recommendations below:
- Legislation should be updated to clarify exactly what the legal tests are for different types of worker status, rather than relying on case law. The report says: "We believe there is merit in outlining in primary legislation the high-level criteria which need to be met… employment statuses should also be distinct and not open to as much interpretation as currently."
- The current, three-tier approach should be retained but "worker" status should be renamed "dependent contractor" status. However, if someone is deemed "employed" for tax purposes by a tribunal, that decision is binding for employment law purposes as well.
- The requirement for someone to perform work "personally" for the employer should no longer be a barrier to them gaining dependent contractor (or currently worker) status.
- "Control" should be more clearly defined in legislation and "not simply in terms of supervision of day-to-day activities".
- The Government should develop an online tool, similar to HMRC's Employment Status Indicator tool, to provide individuals with an indication of their employment status.
- Working time should be sensibly calculated. For example, individuals should not expect to be paid for time they have an app (where they access work) open.
- Companies that use technology platforms to commission work should use the data these apps generate to give workers a more accurate guide of their potential earnings - so workers have the freedom to choose lower-rate jobs but there is greater transparency.
- Piece-rate legislation should be adapted to ensure that workers who are compensated based on output earn at least 20% more than the national minimum wage.
Terms of employment
- It should become a statutory requirement for employees and dependent contractors to receive a written statement of employment particulars on day one of their job, including the rights they are entitled to, how these are calculated and how they are paid.
- Employees or dependent contractors should be able to bring a claim for compensation against an employer who fails to provide a written statement.
- Zero hours contracts should not be banned, but workers on these arrangements should have a right to request a contract that guarantees their hours after they have been in post for 12 months.
- The Government should ask the Low Pay Commission to consider introducing a higher national minimum wage rate for hours that are not guaranteed as part of a contract. For example, a worker who is guaranteed six hours per week but is regularly asked to do more, could be paid the national minimum wage for the first six hours and receive a premium for any hours beyond that.
- The Government could look at ways in which workers can negotiate more guaranteed hours, for example through voluntary collective agreements.
- The 12-week reference period for holiday pay should be made fairer for individuals who have peaks and troughs in work, and should be extended to 52 weeks. Workers should also have greater choice as to how they receive annual leave entitlement, with the option to receive "rolled-up" holiday pay in real time. (For a worker on the national living wage of £7.50 an hour, this would mean their actual remuneration was £8.41 an hour.)
- Where certain employment rights demand a period of continuous employment before an individual is eligible (such as 26 weeks for flexible working), it should be made easier for dependent contractors or gig workers to demonstrate continuous service. The current legislation that allows for a "temporary cessation of work" between assignments of a week should be extended to a month, the report recommends.
- Statutory sick pay should become a basic employment right comparable to the national minimum wage and all workers should be eligible for it from day one. It should be accrued in the same way as holiday pay.
- Those returning from time off for sickness should receive the same protections as those returning from maternity, providing they have engaged with the Fit for Work service.
- As part of its review of the right to request flexible working in 2019, the Government should consider whether or not individuals should be able to request temporary changes to contracts, for example for a particular caring requirement.
- Agency workers should have a right to request a direct employment contract with the hirer once they have worked there for 12 months.
- The use of "Swedish derogation" contracts, which allow agency workers to opt out of receiving the same pay as a permanent member of staff doing the same job after 12 weeks in return for receiving some payment between contracts, should be outlawed.
- Information and consultation regulations should be reviewed and be extended to include all types of worker. The threshold for implementation should be reduced from 10% to 2% of the workforce making a request.
- The Government should require companies beyond a certain size to make public their model of employment, for example their use of agency services or proportion of workers on zero hours contracts.
Tribunals and enforcement
- Individuals should be able to determine their working status without having to resort to or pay for a tribunal hearing, and the burden of proof should be on the employer, rather than the worker.
- Organisations that fail to pay tribunal awards should face an extra fee or some form of enforcement action, with the potential to "name and shame".
- Tribunals should be obliged to consider the use of aggravated breach penalties and cost orders where an employer has repeatedly flouted law, particularly where they know they are already breaking the law because of a "broadly comparable judgement" against them. Tribunals could also award higher compensation if there are subsequent breaches against workers with the same arrangements.
- The remit of the Employment Agency Standards Inspectorate, which looks after agency workers, should be extended to monitor umbrella or other third-party intermediaries.
Tax and national insurance
- National insurance contributions for employed and self-employed workers should be moved "closer to parity". Taylor says that the "principles underlying the proposed NI reforms in the 2017 spring budget are correct" - chancellor Phillip Hammond famously U-turned on these proposals because it broke the Conservatives' 2015 manifesto commitments.
- If national insurance contributions from the self-employed are raised, then there should be a concomitant improvement in pension provisions and family-friendly rights for these individuals.
- The Government's Making Tax Digital overhaul of the tax system should ensure that technology supports the self-employed or gig workers to calculate and pay their tax correctly.
- Cash-in-hand payments for jobs should be phased out and replaced with electronic transactions via platforms such as PayPal.
- The Government should work with employers in certain sectors that employ a high proportion of gig economy workers to see how they can benefit from the apprenticeship levy.
- There should be a new approach to learning accounts, perhaps focusing initially on workers who need to retrain and those who receive Universal Credit.
- The use of "digital badges" or other forms of accreditation could be more widely used for workers in the gig economy to carry verified approval ratings with them if they work for someone else.