The Government’s response to the Taylor Review – more certainty for all or just more red tape for businesses?

This article first appeared in Reward Strategy Magazine in March and updated here to reflect recent developments.

In July 2017, the “Good Work: the Taylor Review of Modern Working Practices” set out over 50 recommendations for improving workers’ rights. The Government’s response to the Taylor Review was published on 7 February 2018 and sets out the Government’s commitment to providing certainty for all regarding workers’ rights. However, no legal changes will be made until the outcome of the four new consultations, which the Government also launched on 7 February 2018. One of the important changes the Government has stated will be implemented is for all types of workers (not just employees) to receive payslips. What other changes should businesses prepare themselves for?

Employment Status

It is accepted that there is a lack of clarity regarding whether or not someone has full employment rights because they are an “employee” as opposed to a “worker” or being genuinely “self-employed” (so called “employment status”). The Government has now launched a consultation on whether any legal changes should be made, including whether a different category of worker should be introduced to reflect the realities of modern work. Therefore no further clarity on this area will be provided until, at the very least, after the current consultation has concluded on 1 June 2018.

The Government has also agreed to develop an online tool to assist in determining questions of employment status. Whether such a tool will, in fact, be of any use to businesses and workers in seeking to determine this typically complex question remains to be seen.

Enforcement of employment rights

The Government has said it will increase the level of penalty it can impose on businesses which fail to pay awards to claimants when they lose at employment tribunals from £5,000, to £20,000. This suggests that the Government is seeking to be more hard-hitting against businesses in seeking to enforce workers’ rights, however the reality is that these penalties are rarely used and, when they are, they are paid to the Government itself, not the worker. The penalty that is more likely to be of real concern to businesses is the “naming and shaming” of employers who do not pay when they lose at employment tribunals, which will clearly be of concern to the PR of any business. However, no changes will be made in this area until the consultation closes on 16 May 2018.

Increasing transparency

The Government accepted many of the recommendations made in relation to increasing transparency in the UK labour market, including that all workers, regardless of their employment status, will in due course be entitled to a written statement of their terms and will be entitled to receive payslips. Such requirements would clearly create more work for businesses. However, it might also prove to be of some assistance to businesses in the future if there is a dispute over terms that were agreed between the parties (assuming, of course, that the documents reflect the reality of the situation in practice). The consultation on measures to increase transparency in the UK labour market closes on 23 May 2018.

Agency workers

The consultation on less traditional types of workers, such as agency and gig economy workers, seeks guidance on how it could best enforce a “key facts document” to ensure that the worker knows exactly what they are being offered. The Government has also stated it is committed to making it easier for workers to calculate their holiday pay and to help seasonal workers get the holiday pay they are entitled to by increasing the pay reference period. Accordingly the Government has proposed that the pay reference period will be increased from the current 12 weeks to 52 weeks.

Also, the Government intends to go further than was recommended in the Taylor Review by introducing a right to request a “more predictable” contract for all workers, including those on zero hour contracts and agency workers. Finally, the significant recommendation in the Taylor Review that the Swedish Derogation (under which agency workers can sign a type of employment contract with their agency giving up certain employment rights – which they would normally be entitled to after 12 weeks – in return for some guaranteed pay between assignments) should be removed will be considered during the current consultation, which will close on 9 May 2018.

What should UK businesses do now?

The Government’s response to the Taylor Review has failed to provide businesses and their workers with any clarity or certainty on workers’ rights; instead it has merely set out its current intention for future change, subject to the outcome of its four new consultations. Whether these consultations will mean real change is afoot, or whether they are simply a smoke screen to buy more time to deal with the important issues raised by the Taylor Review, remains to be seen. Therefore, pending the outcome of the four consultations, and indeed against the backdrop of Brexit, it is business as usual, but employers should watch this space as events unfold.

Key points

• Payroll providers are more than likely to see an increase in business if the recommendation that all workers (not just employees) must receive payslips becomes law.
• The pay reference period used in holiday pay calculations will be increased from the current 12 weeks to 52 weeks, thereby making it easier for workers to calculate their holiday pay and helping seasonal workers get the holiday pay they are entitled to.
• None of the Government’s recommendations as published on 7 February 2018 have legal effect yet – businesses must wait and see what changes, if any, are implemented following the four consultations that have been launched.

Update

Whilst two of the consultation exercises referred to above have now concluded, it is likely to be quite some before we have any indication from the Government about how it intends to proceed. This is partly because of the range and complexity of the issues covered in the consultation papers but also because the Government will probably also want to consider what action to take in response to the first full strategy document published on 9 May 2018 by the Director of Labour Market Enforcement, Sir David Metcalf. He was appointed in January 2017 to look specifically at tackling minimum wage abuse.

Last week’s strategy document set out 37 recommendations including:

• Introducing higher financial penalties for employers who exploit their workers and pursuing more prosecutions.
• Enforcing holiday pay and making it the law that employers must provide a statement of rights for employees and a payslip for all workers.
• Making leading brands jointly responsible for non-compliance in their supply chains. This would be done in private but with public naming of the brand and supplier for failure to correct non-compliance.
• Providing more resources to the Employment Agency Standards Inspectorate to enforce current regulations and expanding their remit to cover umbrella companies and intermediaries.
• Tackling ‘phoenixing’ – the practice of directors dissolving their companies to avoid paying workers Employment Tribunal awards and other enforcement penalties.
• Reviewing NMW guidance and developing a more supportive approach towards companies that ask for advice in order to be compliant.

But case law developments will also continue to be relevant in the months ahead particularly in the context of employment status. We are still waiting for the Supreme Court decision in Pimlico Plumbers Ltd v Smith (heard on 28 February 2018) but have just had the EAT decision in Addison Lee v Gascoigne. The EAT upheld the Employment Tribunal decision that the Addison Lee couriers were “workers” within the meaning of the Working Time Regulations 1998 and were not self-employed. Accordingly, they are entitled to holiday pay and the NMW.

Finally, it is worth mentioning that the final report of the Intergenerational Commission has just been published as well. Although the proposal about the £10,000 “citizen’s inheritance” to be made available to people from the age of 25 attracted most of the headlines, the report also looked at such issues as lower-paying and less secure jobs among young people.