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13 Jul 2017

Spotlight on employment status - Taylor Review


The eagerly awaited Taylor Review of Modern Working Practices has been published this week. The Review, commissioned by the Prime Minister, makes a number of findings and recommendations on employment practices in the UK, with the intention that its proposals will "keep pace with modern business models".

In line with recent 'worker' cases in the employment tribunal and the gig economy being a current hot topic, the Review focuses on employment status and atypical workers. The full copy of the Review can be found here, but we have summarised the key points below.

What are the key proposals?

1. Clarify employment status

  • Clarify the law by enshrining the key factors of employment status that have developed in case law in primary legislation (such as control, mutual obligation and personal service), with secondary legislation and guidance to provide additional detail.
  • Retain the current three-tier approach to employment status (with categories of employee, worker and self-employed) but rename the worker category to 'dependent contractors'.
  • Clearly define the test for worker/'dependent contractor' status, which should place greater importance on control and less on personal service (so that the requirement to perform work personally is no longer crucial).
  • Workers in the gig economy who provide their services through a digital platform should be paid on a 'piece-rate' basis (i.e. paid based on the number of tasks performed, provided that the average worker could earn the national minimum wage).
  • Align the tests for employment status with tax status and consider how decisions in the tax tribunal and employment tribunal could be applied across the jurisdictions.
  • Extend the requirement to provide a written statement of terms to workers as well as employees, to apply from day one, and introduce a standalone right to bring a claim for non-compliance. Workers should also be entitled to receive statutory sick pay from day one, to accrue based on their length of engagement.
  • Allow workers to get an authoritative determination of their employment status by a tribunal before incurring a fee and reverse the burden of proof so that in a tribunal claim the employer must prove that an individual is not entitled to employment rights (rather than the burden being on the claimant).

2. Zero hours workers

  • Introduce a higher national minimum wage rate for non-guaranteed hours (so that employers can continue to use zero hours contracts but are incentivised to provide more guaranteed hours) and give zero hours workers the right to request a fixed hours contract after 12 months.

3. Agency workers

  • Give agency workers the right to request a direct contract after 12 months (with an obligation on the employer to reasonably consider it).

4. Holiday

  • Improve access to holiday pay for seasonal workers by increasing the pay reference period to 52 weeks (from the current 12 weeks) and give workers the opportunity to be paid 'rolled-up' holiday pay rather than taking leave.

5. Enforcement

  • Give HMRC the power to enforce the right to holiday pay (as they currently do in respect of national minimum wage and statutory sick pay).
  • Introduce 'naming and shaming' of businesses that do not pay employment tribunal awards and new reporting obligations (for example, publish information on agency workers and zero hours workers).
  • Increase penalties for businesses that do not apply a tribunal ruling on employment status to similar groups of workers or those that commit subsequent breaches against similar workers.

What does it mean for you?

The recommendations in the Review will be of interest to all employers, and particularly to those businesses who engage a large number of atypical workers. However, the proposals are only recommendations to the Government at this stage and it remains to be seen what, if anything, is actually implemented in practice.

The Review itself notes that a number of the proposals will require further consultation and consideration before they become a reality. Given that employment law reforms are not at the top of the Government's agenda at the moment, it will be some time before any real changes take place.