“Good Work” – the Government’s response to the Taylor review could lead to significant changes for all employers

The Government has responded to last year’s Taylor review, with their paper called “Good Work”, alongside four separate and far-reaching consultation…

The Government has responded to last year’s Taylor review, with their paper called “Good Work”, alongside four separate and far-reaching consultation papers. Most of the Taylor review’s recommendations are being taken forward, but almost all of the changes proposed will be subject to further consultation. Andrew Griffiths (the Parliamentary under-secretary for BEIS) has stated “we are not consulting on whether we are going to do all of this but how we are going to do it. Our ambition is strong”, so it looks likely that much of what was proposed will become law. The media have focused on the gig economy issues and the broad employment-status consultation certainly leaves no stone unturned in the review of existing employee/worker status law. However for most employers we expect that it is some of the other less-publicised proposals which will have the biggest impact in the long term. 

Employment status

The main headlines have focused on the employment status aspects of the review, in particular around the gig economy. The Government agrees with Matthew Taylor’s conclusions and acknowledges that the application of new ways of working has resulted in the boundaries between employees, workers and self-employed becoming more blurred. It accepts that digitalisation in work allocation has created new challenges. The report says that this has made it easier for unscrupulous employers to miscategorise their workers and employees as self-employed.  The report agrees that there should be greater clarity in the law. However how this is to be achieved remains to be determined. The separate consultation paper asks 64 detailed questions about employment/worker-status and certainly leaves no option unexplored. It essentially asks whether: there can be a single new all-encompassing employment status test (with reference to some of the tests used in other countries); whether the existing three categories of employee, worker and self-employed, should be maintained; which factors should be used or changed in determining these categories; and whether tax and employment should be aligned.  If this issue is key to your business the consultation is worth reading and you may even wish to respond. Responses are due by 1 June.

Worker contracts/statements

What is likely to be more important for most of you on a day-to-day basis are some of the other elements of the report and how they are implemented.  At the forefront of these proposals is the intention to require a statement of employment particulars (usually part of the employment contract) to be issued by/on day one of employment (rather than within the first two months). The intention is that such a statement will also in future need to be issued to all workers. Within a consultation paper the Government seeks views on these proposals and goes on to ask whether the legally required content needs updating or changing. Suggestions put forward include: being required to include sick leave/pay, and notice in the actual statement itself (rather than being able to put them in another document); and needing to include all remuneration and/or entitlements to other types of paid leave in the statement.  Enforcement is also up for consultation, as currently compensation for failing to provide such a statement can only be made if other claims are upheld as well, and this looks likely to be changed.

The Government is committed to extending the right to itemised payslips to all workers, and to require pay rates to be included on the slips of those who are time-paid, to encourage transparency.

Other issues

For those who engage atypical workers who do not work every week, the Government are consulting on some potentially important practical changes. At the moment continuity of employment is lost if someone doesn’t work for a week between engagements, stopping many casual employees getting to the two years continuous service required to claim unfair dismissal. The consultation asks whether this should be changed, so that gaps of less than a month do not break continuity as recommended by the Taylor review, or whether some other period should be used. The consultation also asks about retaining/changing the existing exemptions which stop continuity being broken (such as sickness absence or a temporary cessation of work). 

There is a firm intention to change the reference period for holiday pay, to use a year for calculation rather than just the last 12 weeks. This is thought to help seasonal workers and will make sense for many engaged on variable work patterns, so that what they are paid when off reflects their average earnings over the year. As with all things holiday pay, the detail will be key to how/whether it works. However the Government in this paper firmly closes down the possibility of the law being changed to support the payment of rolled-up holiday pay.

The Taylor review included recommendations that: those on zero hours contracts in post for 12 months should have the right to request a contract which guaranteed them the hours worked; and agency workers placed at the same hirer for 12 months should have the right to request engagement by the hirer. The consultation acknowledges the merit to these proposals, but goes further by saying that the right to request should not be exclusive to these groups.  The Government seeks views on implementing a right to request a more predictable and stable contract, available to many workers. This is another laudable intended objective, where we would expect the detail of any subsequent legislation to be the most important thing for many of you.

There is a reiteration of the commitment to promoting high-quality paid internships, whilst stamping out illegal unpaid internships. This may result in the most immediate change, as the Government says that they will formally ask HMRC in the next tax year to prioritise national minimum wage enforcement to focus activity on employers who use unpaid interns – so if this is a concern, please do sort it out now and do talk to us if you are unsure.

The Government is also proposing that state agencies will take on responsibility for enforcing a basic set of core pay rights that apply to all workers, such as sick pay and holiday pay, for the most vulnerable of workers.  This is likely to encourage compliance if adopted.  The Government is also asking the Low Pay Commission to consider higher national minimum wage/living wage rates for non-contractual hours to encourage fixed hours for low paid workers – with the requirement that this is to be reported on by the LPC in October.

Statutory sick pay is under review, but the detail is not in any of the new consultation papers as the Government tells us that this is being considered alongside last year’s Improving Lives paper. The potentially important Taylor recommendation that SSP should be a day one right for all workers regardless of income, is reproduced in the report, but there is a notable lack of specifics about whether this will be adopted.

Perhaps most surprisingly for this Government, the suggestion that the threshold for requests for obligatory collective information and consultation to be triggered should be lowered, are included in consultation and a number of questions are asked. Taylor recommended that only 2% of the workforce should need to request, rather than the current 10% (which could be a remarkably small number of people). Those of you particularly opposed to collective staff bodies having such rights may wish to consider the consultation and respond.

There is an entire consultation paper on agency workers which will be of interest to those of you in that sector or whose business model relies upon engagement through agencies. There are consultation questions around: improving transparency of information provided to work-seekers; the use of umbrella companies; and whether the Swedish derogation should be retained (including asking whether pay between assignments by agencies is being abused).

There is a detailed consultation on Employment Tribunal related issues.  This includes the proposal to name and shame those employers who don’t pay Tribunal awards and improving enforcement of awards.  The maximum penalty which can be imposed for aggravated breaches of employment rights will also be increased from £5K to £20K (the penalty is rarely used, we are told only 20 times in four years). The consultation explores extending this penalty to apply to employers who defend employment-status claims, brought on similar facts to other previously successful claims. Alternatives such as costs orders and an uplift on awards are also floated, for employers who defend claims on status-issues they have lost before. Positively for employers, the proposal to reverse the burden of proof in employment status cases will not be progressed. On Tribunal fees, the paper tells us the Government are considering very carefully the Unison ruling on fees and the potential for reintroducing fees in the future is referred to, but without any specifics at all (or enthusiasm).

One other thing which we are told will not be happening, is that the Government does not intend to revisit the issue of the difference between NI rates for employees and the self-employed.  However whilst this is emphasised, the employment status review does include an entire section which questions whether the current tax distinctions between employees and the self employed should be retained at all.

Comment

In practice none of the documents which have been issued will change the law now. In that respect, we are not much further forward than we were last summer when the Taylor review was published. However these documents do reiterate a genuine intention from the Government to change the law. Some of the likely future changes are clearly signposted and some of the detail is highly likely to become law in the next year or so. For the employment-status conundrum, the consultation is so wide that nothing about the current system is sacred.  Whether that will lead to genuine informed law change is open to some doubt. Perhaps the consultation paper does little more than highlight how difficult it is to achieve the clarity of employment/worker status for all, which Matthew Taylor envisaged.

If the content of this alert or the issues addressed by the review have particular importance for your organisation, we are happy to help (either with tackling problems now or identifying the strategic approach to future changes).  Please liaise with your usual contact in the Weightmans employment pensions and immigration team or speak to Phil Allen (phil.allen@weightmans.com).

 

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