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Published 19 July 2017
Further to our recent alert setting out our initial reaction to the Taylor Report, we have now had the opportunity to digest all 116 pages.
In large part, the report sets out some thoughtful but mostly aspirational recommendations inviting the Government to consider the long term strategy and focus for the UK employment market. These include:
The report's wide ranging review of working practices in the UK has received a somewhat critical response from some businesses, trade unions and lawyers, with some quarters viewing it as a missed opportunity. The report does however include a number of more specific proposals for legal and regulatory reform. We summarise the key proposals below, including our comments and thoughts on whether these recommendations are likely to take effect.
For many this is perhaps the biggest disappointment of the Taylor Report.
Renaming the term “worker”, without more, is rather meaningless and will not have any real impact.
Implementing some of the recommendations would be a significant challenge at this time – for example, the legal tests for a “worker” derive from European law. Changes of this nature will be heavily dependent upon the finalised Brexit position.
Some of the recommendations would be easier to bring about – for example, reversing the burden of proof is relatively straightforward and might represent a compromise if the Government wanted to act quickly in respect of employee status.
The most radical aspect of these proposals would be the repeal of the right to opt out. Currently agency workers can opt out of the existing agency worker protection (broadly to get the same pay / basic terms and conditions as a comparable employee of the company, after completing 12 weeks’ work) provided that they get a guarantee of pay in-between assignments by the agency.
The report expresses concerns that the Swedish derogation has been abused and that the worker often does not have a choice. This opt out is used extensively in the sector and there is an argument to be had that, rather than operating as a disadvantage to workers, it can provide a degree of pay security for agency workers in return for waiving the right to parity of pay with comparable employees. A repeal as suggested in the report would result in significant upheaval to the sector.
Currently all workers are entitled to be paid the NMW for each hour that they work. In some sections of the ‘gig economy’ this can be near impossible to calculate and the report suggests the introduction of a variant on the rule that applies to existing piece workers i.e. that the parties calculate the average number of hours to complete a task and that average is then used to ensure that the worker is paid the NMW. From both an employer and an employee perspective this may be quite an attractive proposal.
However, adding an extra level of minimum wage feels bureaucratic and is unlikely to be attractive in reality.
One of the most surprising recommendations in the report is the return of rolled up holiday pay. This is currently unlawful under European law, albeit that the practice is still relatively common in many sectors. As a practical solution, rolled up holiday pay can be a workable way of ensuring that workers are paid properly for their holiday, provided that there are safeguards to ensure that workers actually take holiday.
Again, this is an area where we will have to wait until after Brexit to be able to amend the relevant legislation.
Certain rights, for example unfair dismissal, only apply if you have 2 years’ continuous service with no breaks of more than 1 week. With increasingly flexible and atypical working arrangements on the rise, it has been suggested that workers should be able to have breaks of up to 1 month (rather than 1 week as present) without losing their continuity of service for the purposes of statutory rights.
This would be a relatively easy thing to change if the Government wanted to take action.
Traditionally, self-employed individuals pay less tax than equivalent workers or employees. The report has suggested that this should change and that all self-employed individuals should pay the same rates of tax as workers and employees. This is precisely the same proposal that the Chancellor retreated from earlier this year due to its controversy. It therefore seems unlikely that anything will change in this Parliament.
It is worth noting that HMRC has robust criteria in place for assessing employee status for tax purposes and many workers (and indeed self-employed individuals) are in fact treated as ‘employees’ for tax purposes.
Currently, even if an individual is successful at an Employment Tribunal and an award is made against a company, if that company refuses to pay that award there is a complicated process to go through in order to enforce payment. The report suggests that there should be a streamlined process in which DBEIS takes the enforcement role.
In theory, this is not too difficult. However there would clearly be increased costs associated with such a process which would need to be addressed.
The report is critical of some of the unintended consequences of the apprenticeship levy, including the increased cost burden for many businesses.
In addition, many workers count towards the levy threshold (because they are paid through payroll) but are not then eligible to benefit from any of the advantages because they are classified as workers, not employees. The report suggests that the levy should be broadened so that more individuals can benefit from it which is a very sensible suggestion.
This is a slightly controversial aspect of the report in that it states that the law in this area is already clear and that no changes need to be made in terms of an “intern status”. The report states that if a person is obtaining something of value from an internship, they are most likely to be a worker and entitled to the National Minimum or Living Wage.
However, the law is this area is not that clear and so we question the likely benefit, or impact, of having additional guidance in this field.
It is true that traditionally SSP is a somewhat bureaucratic system which has evolved from a taxation / social benefits basis rather than from an employment basis.
However, the suggestions put forward by the report are not particularly attractive – notably that workers should have some specific legal right to return to work after long term sickness absence (in parallel to a woman on maternity leave). This misunderstands the complexities of an individual returning to work after a period of long term sickness.
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Ben Daniels, Francesca Muscutt