Taylor review recommendations: potential workplace implications


25 July 2017

Tasked with considering how employment law and practices need updating to keep pace with modern business models, the Taylor review recommendations were published in July. The Review received a lukewarm response from employer bodies and a broadly critical reception from trade unions, with some saying it lacked ambition.

 

Next steps: are the Taylor review recommendations binding?

The Review is not binding on the Government and it is currently unclear whether or how it will be implemented. The Government has stated that it will respond, possibly before the end of 2017, and a consultation would seem the most likely next step.

 

Should employers act now?

Given the above uncertainty, many employers will decide to await the Government’s response before making changes in response to the Review. In the meantime, some will find useful the case studies, research, data and ideas set out in its pages.

For gig and platform businesses, of more immediate interest are the many ongoing employment tribunal claims raising employment/worker status issues, (for a summary on employment status, read here).

 

Overview of the Review’s recommendations

The Review aims to improve quality of work in the UK, by tackling potential exploitation and making employment and tax law clearer to help people exercise their rights. Of particular note to employers are the following recommendations:

  1. Amend the legal test for employment status, potentially making it easier for an individual to be labelled a ‘worker’
  2. Extend the current right for employees to receive a written statement of their terms to ‘workers’ and make it an enforceable day one right
  3. Make employment status adjudication by a tribunal more accessible (fee-free and rapid) and place the burden of proof on employers to show status, reversing the status quo
  4. Abolish the agency worker ‘Swedish derogation’ which provides an exemption from the equal pay principle
  5. Adapt existing National Minimum Wage (NMW) law which calculates fair pay for piecework to better accommodate payment by task in the gig economy
  6. Consider a premium NMW rate for non-guaranteed hours where workers are on zero or short hour contracts
  7. Provide a right to request a guaranteed hours contract for zero hour workers and a direct contract with the hirer for agency workers, both after 12 months
  8. Promote better employee engagement, including making it easier for staff to formally request an information and consultation arrangement such as a staff forum
  9. Increase transparency by introducing reporting for some larger employers on workplace staffing models, including the use of agency workers.

 

A summary of the potential impact on employers

The table below considers the practical implications of some of the above recommendations:

Taylor Review recommendation Employment law points to note Potential employer impact
Make determining employment status clearer and simpler by replacing the current minimalistic legislative tests for employment status, as well as providing a Government-backed online tool to help determine employment status The Review suggests transferring current case law tests for status into legislation and improving guidance. However, high numbers of status claims currently before tribunals suggest that existing tests are also not clear and that this approach might not help with the many borderline cases If the Review’s recommendation delivered a better understanding of status, there could be an increased readiness by workers to enforce their rights resulting in more status claims. Employers would need to risk assess engagements to limit exposure to such claims
Those intermediate individuals who qualify for workplace rights as ‘workers’, but not employees, should be renamed ‘dependent contractors’ and the legal test for ‘worker’ should be amended to place greater importance on employer control and less emphasis on the need for personal service While ostensibly only a name change, this could aid understanding of the intended scope of some workplace rights.

Changing the legal test in this way would mean that substitution clauses in contracts would have less legal weight

Renaming it and changing the legal test could raise the profile of this intermediate status and make it easier for some individuals currently working as independent contractors to claim ‘worker’ status (with resulting minimum pay, holiday pay, pension and other rights) creating significant new costs and complexities for some organisations
Make changes to the enforcement of status-related rights including: a free, fast-track initial adjudication on status at tribunal; reversing the burden of proof in status hearings; new financial penalties for those employers ignoring the outcome of status tribunal judgments; give HMRC responsibility for enforcing holiday pay for low paid workers Employment tribunal fees have been seen by many as a significant barrier to bringing status claims to tribunal. Free fast-track adjudication on status and putting the responsibility on the employer to prove the nature of the relationship would therefore be a significant change Many status claims are union backed, due to their cost and complexity. These changes would be expected to result in more status claims and for employers to make widespread change, if they lose, to avoid the proposed ‘repeat offender’ penalties.

The idea of an earlier and potentially cheaper adjudication of status where business models are in dispute will be attractive for some employers

Improve the rights of agency workers including: ending the ‘Swedish derogation’ (SD) under the Agency Workers Regulations; introducing a right for agency workers to request an employment contract with the hirer after 12 months which must be considered in a reasonable manner; improve pay information provided to agency workers before they accept work The SD provides an exemption from the right to equal pay if the agency worker has a permanent contract of employment with the agency with certain minimum requirements. Its removal would have significant implications for both agency workers and agencies and, as a minimum, a transitional period would be needed The SD has been controversial, criticised by some as artificially supressing engagement costs and agency worker pay, whilst defended by others as guaranteeing minimum employment rights. Even so, it is used extensively by certain business sectors and its abolition would be expected to meet business opposition.

A right to request could result in hirers curtailing longer-term agency assignments

Amend the NMW including: adapting existing NMW piece rates legislation to accommodate NMW calculations in ‘pay per task’ gig and platform models; consider the introduction of a higher NMW for those working hours that are not guaranteed as part of the contract such as zero hour workers and those on short hour contracts but who regularly work longer hours Currently, NMW legislation provides for a ‘fair piece rate’ for a task performed. This is set at 20% above the rate that an average group of workers would take to perform a task. Given the online and data-rich nature of gig employment models, the Review suggests that many could give real time piece rate pay information before workers decide whether to accept a task. In this way, when activities levels are low and the rate of pay per task drops, then workers are making an informed choice when deciding to work

 

 

Adapting the NMW to reflect new working practices would be welcomed by some employers, given that a failure to do so may stifle innovation. However, any change would have to be subject to comprehensive review to avoid introducing new cost barriers and complexities.

The suggestion of a higher NMW rate for non-guaranteed hours would have major cost implications for organisations reliant on low-paid zero or short hour workers and would be expected to result in more guaranteed hours where commercially feasible

Promote better employment engagement, particularly in sectors with high levels of casual employment, by supporting the use of innovative IT models to facilitate the self-employed to ‘come together and discuss the issues that are affecting them’ and make it easier for workplaces to have elected staff representatives and consultation forums Currently, the Information and Consultation Regulations (ICER) offer a framework for the compulsory provision of information and consultation to elected employee representatives if at least 10% of employees make a request. The Review proposes extending the Regulations to cover ‘workers’ and reducing the 10% trigger to 2% While ICER has had very little take-up in the UK to date, such an extension could make the difference. With separate Government proposals to require listed companies to report on employee engagement, some employers are already reviewing their employee engagement strategy. An ICER compliant forum could therefore be assessed as potential option as part of such a strategy

 

 

Naeema Choudry, Partner
e: naeemachoudry@eversheds-sutherland.com
t: +44 161 831 8283