Key Recommendations from the Taylor Report

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Key Recommendations from the Taylor Report

Published 19 julio 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:

  • encouraging a focus on 'quality' work not just quantity (although recognising that this is inherently subjective);
  • embracing the importance of flexibility for employees (and recognising the importance of it not being abused);
  • giving people the means and opportunity to progress in their jobs; and 
  • taking advantage of technology to support more flexible working arrangements.

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.

The Report's Recommendations  Our Comments  Will it happen?
Employee status
  • The current 3 tier system of employee status (employee, worker and self-employed) with different levels of employment rights should be retained.
  • “Worker” should be renamed “Dependent Contractor”.
  • A simple legal test for employee and worker should be introduced.
  • The test for worker should focus more on the degree of control the company has over the individual rather than more abstract legal concepts such as personal service or the right to substitute.
  • A new Government online test (along the lines of the HMRC test) should be introduced to provide individuals with a clear steer on what their status is and what rights they have.
  • There should be no Tribunal fees for employment status cases and the burden of proof should rest on the engaging company.
  • There should be increased costs and higher damages/awards made if the company in question has already lost a comparable employment status claim.

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.

Unlikely and not before Brexit.
Zero hour contracts
  • These should stay.
  • Workers should have the right to request guaranteed hours after 12 months of working for a company.
This is a somewhat controversial recommendation which essentially tries to appease both companies and workers but, in reality, is unlikely to achieve this. Maybe.
Agency Workers
  • There should be an improvement in the information that is given to agency workers.
  • Agency workers should have a right to request direct employment after 12 months of working with a company.
  • There should be an extension of the role of EAS to police umbrella companies.
  • There should be a repeal of the right to opt out of the Agency Worker Regulations (i.e. to abolish the “Swedish derogation”).

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.

No.
National Minimum Wage
  • A version of the ‘piece rates’ formula should be introduced for workers where it is difficult to determine the hours that they actually work.
  • There should be a new higher rate of NMW for non-guaranteed hours.

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.

No.
Holiday pay
  • Companies should “promote” the right to holiday pay to workers.
  • The reference period should be increased to 52 weeks.
  • Rolled up holiday pay should be backer-introduced (with safeguards).
  • Enforcement should be dealt with by HMRC (for low pay only).

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.

Not before Brexit.
Break in service
  • There should be an increase from 1 week to 1 month in order to break continuity of service.
  • There should be a clarification of the ‘cessation of work’ rules.

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.

Maybe.
  • Taxation
    The taxation of individuals should be broadly neutral irrespective of whether they are employees, workers or self-employed.


  • Workers should be treated as employees for tax purposes, i.e. subject to PAYE and NICs.

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.

No.

 

 

 

 

Yes.

Written statement of engagement for workers
  • Workers should be given a written statement on day 1.
  • This written statement should include a description of applicable statutory rights.
  • There should be standalone compensation for workers who do not receive this written statement from companies.
Many workers do not know what their rights are as they often do not receive the equivalent information that an employee has a right to receive. Implementing his recommendation would be relatively easy and cost neutral. Maybe.
Employee relations
  • The Information and Consultation Regulations should be revamped and extended to workers.
  • The threshold should be reduced from 10% to 2%.
The Information and Consultation Regulations have only ever seen a modest take up in the UK. The Prime Minister has made some positive comments about worker participation but it seems unlikely that this will result in broadening what are already quite bureaucratic regulations. This is set against a backdrop that some trade unions have voiced concern at the report’s lack of focus on the role played by trade unions in the modern workplace. No.
Enforcement
  • There should be a simpler enforcement procedure.
  • Non-compliant companies should be “named and shamed”.
  • Larger employers should be required to report on their employment structures and other key information.

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.

Unlikely.
Apprentice Levy
  • The apprenticeship levy is an additional cost for employers and may inadvertently be a disincentive for employers to take on more staff.
  • The apprenticeship levy should be amended so that it is better suited for atypical work.
  • Workers should be able to access the apprenticeship levy as well as employees.

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.

Maybe.
Interns
  • The law in relation to interns is already clear.
  • There should however be guidance in order to stamp out exploitation.
  • NMW should be enforced by HMRC.

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.

Maybe.
Sickness and SSP
  • SSP should apply to all workers and be payable from day 1.
  • SSP should accrue like holiday pay.
  • Workers should have a right to return to work after long term sick leave.

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.

 No.

Authors

Philip Harman

Philip Harman

Manchester

0161 934 3058

Michelle Jenkins

Michelle Jenkins

Manchester

+44(0)161 934 3110

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