Government Response to the Taylor Review: Good Work?

14 minute read
09 February 2018

On 7 February the Government set out its 'Good Work plan', a response to the Taylor Review, 'Good work: the Taylor review of modern working practices', published in July last year. The Taylor Review investigated what impact modern working practices are having on the world of work. It was followed by a joint Work and Pensions and Business, Energy and Industrial Strategy Select Committees' report, 'A framework for modern employment'. This report echoed many of the recommendations in the Taylor Review including greater clarity around employment status, better upfront information to workers and increased enforcement of employment rights.

The Government's press release states it has "acted on" all but one of the Taylor Report recommendations and all but one of the House Select Committee's recommendations. But note the language, "acted upon" is not the same as "accepted". Some recommendations have been considered but disregarded, for example rolled-up holiday as being unlawful under EU case law. Many of the recommendations have been accepted in principle, but just how to implement them is still up for discussion. Before finalising its proposals for change, the Government has launched four separate consultations on:

  1. Employment status running until 1 June 2018
  2. Measures to increase transparency in the UK labour market running until 23 May 2018
  3. Agency workers recommendations running until 9 May 2018
  4. Enforcement of employment rights recommendations running until 16 May 2018

The Government claims "millions of flexible workers will receive new rights under major Government reforms". Critics argue that the Government is not going far enough nor quickly enough. True, the Government's Response is more akin to cautious first steps towards legal changes reflecting modern working practices rather than giant leaps. Unions and other groups of workers may want immediate change but it's not just helpful for the Government to consult first, it's essential. Introducing a new statutory test for employment status is a bold move. If this and other changes are going to be successful, the Government needs to be careful to get it right.

So what does the 'Good Work plan' propose?

The Good Work Plan

a. Employment status

  1. Consultation on Employment Status to explore the best ways to improve clarity for those on the boundary between employment and self-employment, including options for legislative reform (see more below).
  2. Develop an online tool for assessing employment status once status test changes are made.
  3. Rejected: the recommendation for 'worker by default' presumption. Will revisit if new statutory test and on-line assessment tool for determining employment status in place.

(Employment status consultation)

b. Working time

  1. Consult on definition of working time for platform workers (those who find jobs through apps or online) for National Minimum Wage (NMW) purposes only as part of employment status consultation.
  2. Increase awareness of holiday pay entitlements.
  3. Consult on increasing the reference period from 12 to 52 weeks.
  4. Consult on ways to assure atypical workers receive their full holiday entitlement (Taylor recommendation on use of rolled-up holiday pay rejected as unlawful under EU case law).

(2, 3 and 4 part of the Transparency consultation)

c. Continuity of service

  1. Extend the period counted as break in continuous service beyond one week
  2. Consult on length of new period counted as a break and on existing exemptions to the break in continuous service rules (Taylor recommendation less than one month).

(Transparency consultation)

d. Right to written particulars of employment

  1. Extend to include workers as well as employees.
  2. Consult on:
    • requiring statement to be given on day one rather than within two months
    • contents of principal statement
    • information that will continue to have two month time limit, such as pensions.

(Transparency consultation)

e. Pay

  1. New legislation to extend right to receive a payslip to all workers.
  2. New legislation requiring employers to state the hours being paid for on payslips of time-paid workers from 6 April 2019.
  3. Ask the Low Pay Commission to consider the impact of higher minimum wage rates for workers on zero-hour contracts.
  4. Changes to statutory sick pay are being considered as part of the 'Improving Lives: Future of Work, Health and Disability' review underway

f. Agency workers

  1. Consult on key facts information that must be provided to agency workers on rates of pay and those responsible to paying them.
  2. Consult on extending the remit of the Employment Agency Standards Inspectorate to cover umbrella companies and intermediaries in the supply chain.
  3. Consult on repealing laws allowing agencies to employ workers on lower rates than permanent employees (the so-called Swedish derogation).

(Agency workers consultation)

g. Family friendly

  1. Take steps to ensure new and expectant mothers know their workplace rights and raise awareness amongst employers of their obligations.
  2. Launch a new campaign to encourage more working parents to share childcare through Shared Parental Leave.
  3. Review the legislation relating to protection against redundancy.
  4. Launch a joint taskforce with industry to promote awareness and take-up of the right to request flexible working.

h. Workforce relations

  1. Consult on introducing a new a right for all workers on flexible contracts to request a more stable contract.
  2. Monitor impact on workforce structures transparency of the corporate governance reforms announced in August 2017 and expected to come into effect by June 2018 to apply to company reporting years commencing on or after that date.
  3. Engage with stakeholders on ways to promote greater employee engagement an workforce relations.
  4. Consult on the effectiveness of the Information and Consultation of Employees Regulations (ICE).

(1 and 4 part of the Transparency consultation)

i. Enforcement of employment rights

  1. Take action to improve the interpretation of the law and HMRC enforcement to ensure unpaid interns are not doing the job of a worker.
  2. Consult on State-led enforcement with HMRC taking responsibility for enforcing core pay rights of NMW, sick pay and holiday pay for low paid workers.
  3. Consult on measures to improve tribunal awards enforcement.
  4. Consult on introducing a new naming and shaming scheme for employers who fail to pay employment tribunal awards.
  5. Consult on increasing 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.

(2 to 5 part of the Enforcement consultation)

j. Social mobility

  1. Continue to assess the impact of the apprenticeship reforms and levy.
  2. Develop a unified framework of employability skills.
  3. Monitor if intervention needed on transferability of verified approval ratings between platforms after the implementation of the General Data Protection Regulation (Gov't suggests GDPR will make transferability easier)

k. Self-employed

  1. Investigate the possibility of setting up on on-line platform for self-employed people to discuss issues affecting them.
  2. Publish a Call for Evidence on how to improve digital platforms to ensure users are compliant with tax rules.

The Employment Status consultation

The key recommendation of the Taylor Review is that the case law principles that govern employment status should be codified in primary legislation.

In the Consultation, the Government accepts that there is a lack of clarity and certainty over employment status. It is therefore seeking views on the possibility of codification. In particular, it raises the question of whether mutuality of obligation, personal service and control are still relevant in the modern workplace and, if so, how they could be defined in legislation.

The Consultation also raises the possibility of developing an alternative 'better' test for employment status aimed at being simpler, clearer and more coherent than existing tests developed through case law. Options under consideration are:

  • A 'precise criteria' test: a test based on more precise and objective criteria, such as length of engagement, the percentage of an individual's income that comes from one employer, and where the work is done;
  • A 'precise structure' test: a test based on a clear order, hierarchy or weighting of the criteria.
  • A less complex test by reducing the number of factors to consider. As an example the Government points to the test used for taxing individuals who work through agencies, which depends on whether they work under the 'supervision, direction or control' of another.

As acknowledged in the Consultation, codification of the test for employment status would involve trade-offs. On the one hand a simple and clear formula will give more certainty. On the other hand, the current case law based framework provides the nuance and flexibility often needed when applying the test to different circumstances which are inevitable in the labour market.

What the Government has ruled out

The Government has rejected:

  1. 'Worker by default' presumption

    The Select Committee's recommendation for a 'worker by default' presumption has been rejected at least for the next few years. In cases where employment status is in dispute, the proposed presumption would have placed the burden of proof on the employer to show that the individual was not a 'worker'. A shifting of the burden of proof could have made a significant difference in circumstances where claimants struggle to compile all the relevant evidence, as is the case in relation to discrimination claims.

    The Government has ruled out even considering a 'worker by default' presumption, until a decision on a new legislative employment status test has been taken and an online employment status tool developed.

  2. National Insurance contributions (NIC) differentials for employees and the self-employed

    The Taylor Review recommended that the difference between the National Insurance contributions of employees and the self-employed be reduced. Following Budget 2016's climb down on this, the Government has no plans to revisit the issue.

  3. Rolled-up holiday pay

    With regard to holiday pay, the Taylor Review recommended that individuals should have the choice to be paid 'rolled-up' holiday pay, receiving a premium on their pay instead of paid time off. The Government accepts the concern that some workers may not be receiving the holiday pay to which they are entitled but will not legislate to allow rolled-up holiday pay because the practice has been ruled unlawful under EU case law.

  4. Non-compete clauses

    Despite not being part of the Taylor Review or Select Committee recommendations, the Government has also confirmed in the Good Work plan that it will not be taking action on non-compete clauses. Non-compete clauses were the subject of a Call for Evidence in May 2015 on whether such clauses unfairly prevent individuals from moving between jobs. The Government notes the outcome of the Call for Evidence was that restrictive covenants are valuable and necessary and do not unfairly affect an individual's ability to find other work. It therefore does not propose any action in this area.

The Potential Impact

Much of the Good Work Plan is either a call for further consultation at this stage or agreeing to look at possible future reforms and guidance. Setting employment status to one side for the moment, changes, such as lengthening the reference period for holiday pay calculations and extending the period counted as a break in continuous service beyond one week, may have significant impact. Reviewing legislation relating to protection against redundancy for pregnant employees and those on maternity leave is another area of potentially significant impact.

Employers utilising app-based workers should keep an eye on the proposals under consultation on defining working time for platform workers for NMW purposes. At the moment, case law says they are 'working' for NMW purposes when (i) they have the app switched on, (ii) are in the territory in which they are licensed to use the app and (iii) ready and willing to accept tasks.

For employers using agency workers, consider now the cost implications of the likely removal of the 'Swedish derogation' in in any contract negotiations with employment businesses/agencies. Those dealing with payroll need to take note of the payslip changes on their way in April 2019.

Turning back to the employment status review, ultimately, employment status is a complicated subject because employment relationships are complicated. A status test set down in legislation rather than case law doesn't change that fact. Trying to encapsulate the nuanced factors developed over years of case law into legislation will be no easy feat.

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