Key Recommendations from the Taylor Report

• 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.

• These should stay.
• Workers should have the right to request guaranteed hours after 12 months of working for a company.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• The Information and Consultation Regulations should be revamped and extended to workers.
• The threshold should be reduced from 10% to 2%.

• 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.

• 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.

• 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.

• 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.