15 January 2019
In its Good Work Plan, published in December 2018, the UK government has set out what it describes as its vision for the future of the UK labour market: a place where people are rewarded for hard work, good employers are celebrated, productivity and earnings are growing, and there is greater clarity especially around employment status in what it calls evolving business models, but is better known as the gig economy.
The government says it has accepted virtually all of the recommendations made by the Taylor Review (one obvious exception being the suggestion that rolled up holiday pay should be lawful, despite this being contrary to EU law).
Flexibility can be good for workers, but if too much business risk has been transferred to the individual it may affect their financial security and personal wellbeing. All workers will have the right to request a more stable contract. Those who are content to work variable hours each week will be able to do so, but those who would prefer more certainty will be able to request a more fixed working pattern (for example, by setting a fixed number of hours, or certain days of the week) from their employer after 26 weeks' service.
New legislation will extend the time required to break a period of continuous service from one to four weeks, so it is easier for employees to access their rights.
Experts have identified that worker voice arrangements result in greater staff commitment, but the current law in this area appears to have had limited impact. The Information and Consultation of Employees Regulations 2004 (which apply to all businesses with 50 or more employees) provide a framework to for collective information and consultation arrangements and provide a mechanism for views to be taken into account when major workforce changes occur (such as restructuring).
From 6 April 2020, the thresholds for worker support for arrangements under the Regulations will drop from 10% to 2%. Lowering the threshold is an important step in improving voice in the workplace, says the government. This is more radical than it looks. There are a number of union recognition battles that are hard for workers to win and the proposal would go some way to reverse that pattern. However, because there will still be a minimum threshold of 15 employees, this change will effectively only affect those businesses with at least 750 employees.
For smaller employers, the government will work with other organisations to promote the development of better employment engagement.
The UK's three tier structure (employee, worker and self-employed contractor) determines employment rights, while someone who is a worker could be either employed or self-employed for tax purposes. This will not change. However, new legislation will apparently be introduced to improve the clarity of the status tests, "reflecting the reality of modern working relationships", and to tackle concerns that some businesses are evading their responsibilities by misclassifying or misleading staff.
The Taylor Review recommended that the tests should put more weight on control and less on the right of substitution, but the Good Work Plan doesn't say if that's what is intended. And does this mean that there will be additional penalties for employers who are found to have tried to game the system, for example by inserting substitution clauses solely to defeat worker status? (It's worth remembering that one of the few cases that ended in victory for the gig economy platforms did so almost entirely because of a (rarely, but genuinely) exercised right of substitution in the contract between Deliveroo and its riders.)
There will be further guidance for employers and individuals and an online tool. The government also promises to align the employment status frameworks for the purposes of employment rights and tax, but admits that detailed proposals will be needed.
From 6 April 2020, all workers (not just employees) will be entitled to a statement of terms and particulars from day one of their contract – not within two months of starting, as employees are entitled at present. (There will some flexibility for employers who decide to provide particulars in instalments as long as most are provided in a single document on day one and the remainder within two months.)
Under new regulations, the list of particulars which must be given to employees will be extended to workers and will also include:
The new law will apply where the worker begins work for that employer on or after 6 April 2020. For existing employees, whose employment began on or after 30 November 1993 but before 6 April 2020, the existing law continues to apply unless the employee requests a new statement.
This is a political hotspot. It is bound up with attitudes to the EU.
The biggest change will be end of 'Swedish derogation' (or pay between assignment) contracts from 6 April 2020. The ban will guarantee equal wages with comparable permanent workers where the agency worker has worked for that business for 12 weeks or more.
It is increasingly unusual for agency workers to have gaps in their contracts, and these contracts are being used simply to reduce the wage bill of the business. Government research found examples of misuse where contracts oblige agency workers to be constantly available for work, sometimes anywhere in the UK. If agency workers turn down a few hours' work, they will not receive pay between assignments. Another example was offering night shifts to workers with family commitments that mean they can only work during the day. One employment agency commented that it had "yet to see an example of a worker actually being paid between assignments".
Workers who already have such contracts disapplying their right to equal pay with that paid to permanent staff must receive a written statement by no later than 30 April 2020 informing them of their rights relating to pay. Workers will have the right not to be unfairly dismissed or subjected to a detriment for a reason relating to the new law.
However, the government also promises that in the future, employment businesses will be required to give agency workers specific information (known as a key facts page). This must include the type of contract under which the worker is employed, the minimum rate of pay they can expect and how it will be paid, and any deductions or fees to be made by an intermediary or umbrella company, with an estimate or example of what this will mean for their take-home pay.
Business groups will asked to assist in the preparation of guidance for employment businesses, who will be expected to carry out due diligence on their supply chain (such as umbrella companies) to prepare the key facts page, and maintain some level of responsibility for the worker.
New legislation will expand the remit of the Employment Agency Standards Inspectorate's role will be expanded to protect agency workers who have had pay withheld or unclear deductions made by an umbrella company. The role of umbrella companies will be monitored by both the EASI and the Gangmasters and Labour Abuse Authority.
From 6 April 2020, the holiday reference period will increase from 12 to 52 weeks, so that workers in seasonal and atypical workers are not disadvantaged and can benefit from their full holiday pay entitlement.
A government 'awareness campaign' is promised to boost awareness of workers' entitlement to paid leave. New guidance, including real life examples, will support the interpretation of the rules on holiday pay and there will be either a new, or an updated and improved (depending on which sentence you read) holiday pay calculator.
Restaurant chains that make deductions from staff tips have seen the effect on their brand and reputation in recent years. Future legislation will ban those employers who still take a slice or all staff tips from doing so. This is hoped to mean more money for workers (many of whom are earning the minimum wage), a level playing field for employers, and ensure greater consumer confidence.
Without enforcement, the law is worthless. The Plan promises reform to ensure the UK's approach to enforcement is fit for purpose in the 21st century.
From April 2019, tribunals will be able to order aggravated breach penalties against employers of up to £20,000 (the current limit is £5,000). New guidance is promised to provide examples of how such penalties, together with costs awards and compensation uplifts, can be used.
The BEIS employment tribunal penalty scheme will continue to offer a free scheme to individuals who register their unpaid tribunal award with an enforcement officer. The officer issues a warning notice, and if the employer does not pay within 28 days then it will have to pay both the original amount and up to 50% more as a penalty.
Other future changes promised include:
Many of these will require further announcements and yet more public consultation before the detail is clear.
Despite the Taylor Review's recommendation – and whatever happens to Brexit - this government has no intention to pick a fight with the EU over rolled-up holiday pay (paying an allowance with each wage packet equivalent to the holiday pay 'earned' and allowing the worker to take time off without further pay at a later date).
Workers are entitled to the national minimum wage (or the national living wage if they are 25 or older). The Taylor Review proposed adapting piece rates legislation, or the introduction of a higher minimum wage for non-guaranteed hours or minimum notice after which additional hours should be paid at a higher rate. Given the Court of Appeal's decision in the Uber case that workers' working for technology platforms should be considered to be working when they are in their working territory, logged on and ready to work, the question of 'multi-apping' will remain unanswered for now.
The government agrees with the Taylor Review that the level of National Insurance contributions paid by employees and self-employed people should be moved closer to parity – but, after the U-turn when NI reform was attempted in the Spring 2017 Budget, the government has no plans to address this issue.
The Taylor Review proposed that in hearings where status is in dispute, it should be for the employer to prove that the individual is not entitled to certain rights, and not the other way round. The government says it will return to this recommendation once an online tool for employment status has been developed.
Finally, a word on employment tribunal fees. The government has previously suggested that it might reintroduce fees if a regime could be devised which strikes a lawful balance between raising revenue and access to justice. The Taylor Review was published only two weeks before fees were abolished and said that individuals should be able to get determination of status without paying a fee. The Good Work Plan says only that, if fees are reintroduced, the government will consult on this proposal.
While the will to develop a framework fit for the British labour market in the 21st century may be there, the majority of the changes set out do not have any timing attached. Given the uncertainties around Brexit, this is perhaps not surprising.
Employment status is a huge issue. It is disappointing that a year and a half further on from the recommendations of the Taylor Review, and despite consultation last year, we are no further on in seeing what the promised clarity on the test might actually mean for businesses and individuals.
Meanwhile, some of the proposals do have a clear cost to employers and end-users of agency work. Those who use agency workers under pay between assignment contracts, for example, should now be crunching the numbers to see how those costs will affect their business model.
While new business models continue to emerge, cases are developing the law in these areas. As the dissenting judge in the Uber decision commented, these issues remain of wide public concern. Parliament – whichever government is in force - should act to resolve these policy issues without further delay.