The Taylor Review’s final report on employment practices in the modern economy has been delivered to Government and published on 11 July 2017. The Review panel, chaired by Matthew Taylor, has made a number of recommendations for specific measures which the Review panel would like to see enacted as soon as possible, but also makes the case for longer term strategic shifts. As an overarching principle, the report issues a call to sign up to the ambition that all work will be good work as measured against six high level indicators of quality: wages; employment quality; education and training; working conditions; work life balance; and consultative participation and collective representation.

Seven key policy approaches

The Review sets out seven key policy approaches towards fair and decent work which underpin the panel’s recommendations, broadly as follows:

1. Our national strategy for work should be explicitly directed toward the goal of good work for all. The same basic principles should apply to all forms of employment: there should be a fair balance of rights and responsibilities, everyone should have a baseline of protection and there should be routes to enable progression. Over the long term taxation of labour should be more consistent across employment forms whilst improving the rights of the self-employed;
2. Platform-based working offers opportunity for genuine two-way flexibility and should be protected whilst ensuring fairness. Worker status should be maintained (but re-named dependent contractor’ status) but we should be clearer about how to distinguish workers from the self-employed;
3. The law should help firms make the right choices and individuals to know and exercise their rights. Dependent contractors need additional protections and we need stronger incentives for firms to treat them fairly;
4. The best way to achieve better work is responsible corporate governance, good management and strong employment relations rather than regulation;
5. Everyone should feel they have realistically attainable ways to strengthen future work prospects through training;
6. The UK needs a more proactive approach to workplace health; and
7. The UK needs sectoral strategies to ensure that people are not stuck at the living wage minimum.

The report makes the following practical recommendations to further these principles:

Employment status

Determining employment status must be simpler, clearer and give individuals and employers more information.The report notes that how the law on employment status is interpreted varies widely and that legislation must do more to improve clarity. The report refers to the current tests and factors which determine employment status, namely personal service, mutuality of obligation, control and whether the individual is carrying out a business undertaking and suggest that if the Government considers these to be an accurate reflection of the main characteristics of employment status, they should be outlined in legislation. The detail underpinning these high level criteria should be specified in a way which can be updated quickly, such as secondary legislation or guidance.

Worker status

The Review favours maintaining the existing three-tier approach to employment status with employees, the self-employed and an intermediate status (currently worker) between the two but recommends re-naming the intermediate status as ‘dependent contractors’. There should also be a clearer distinction between employees and dependent contractors, with a clearer definition of dependant contractors which better reflects the reality of modern working arrangements. The report specifically recommends removing the requirement for personal service and giving control greater importance. Essentially, people working for a firm that has a controlling and supervisory relationship with them should have to treat them as workers.The report also recommends extending the right to a written statement of basic terms and conditions, including holiday, sick pay and pension, at the start of employment to dependent contractors and introducing a standalone right to bring a claim for compensation if the employer fails to do so.The report also recommends the development of an online tool to provide an indication of employment status similar to HMRC’s online tool for tax status.

The ‘gig’ economy

Recognising that the proposed change to the test for worker status would potentially bring many more individuals in the so-called gig economy within worker status, who would then become entitled to the National Minimum Wage (NMW), the report recommends changes to how the NMW is calculated in order to preserve flexibility. under this proposal, firms would not have to pay workers the minimum wage for every hour that they are, for example, logged onto a platform. Instead, Taylor is recommending that the Government adapt the piece rate legislation to enable platforms to compensate workers based on output provided they are able to show that the average worker receives 1.2 times the minimum wage, that workers can choose when they work and that they get real-time information about how much they are likely to earn on a shift.The report also recommends that Government should strongly encourage gig platforms to enable individuals to be able to carry approval ratings with them when they move from the platform.

Tax and the rights of the self-employed

The report recommends that renewed effort should be made to align employment status with tax status, and also calls for a debate about how labour is taxed. The employed are currently taxed more than the self-employed, which the Government had proposed to address by putting up national insurance contributions for the self-employed, until a backlash forced it to drop the idea in March. Taylor believes that the level of NICs paid by employees and the self-employed should be moved closer to parity, but that the self-employed should have additional rights, particularly to parental leave.

Zero hours contracts and casual work

The report does not recommend banning zero hours contracts, but does recommend that people engaged on zero hours contracts should have the right to request fixed hours with a starting assumption of the average hours worked over the previous 12 months. Companies should have to publish information about how many such requests are received and granted.The report also recommends that the Low Pay Commission should consider the introduction of a higher rate of NMW payable for hours which are not guaranteed as part of the contract.The report also recommends increasing the maximum gap between work assignments which will not break continuity of employment from one week to one month (or potentially longer in specific circumstances) to make it easier for casual workers to qualify for employment rights.

Paid holiday

The report recommends increasing the reference period for the calculation of holiday pay to 52 weeks so that casual workers receive holiday pay based on their average earnings over the year. The report also recommends that individuals should have the choice to be paid rolled-up holiday pay, meaning that a dependent contractor could choose to receive a 12.07% premium on pay rather than being paid during holiday periods.

Statutory sick pay and sickness absence

Statutory sick pay should be reformed so that it is explicitly a basic employment right for which all workers are eligible regardless of income from day 1, payable by the employer and accrued on length of service. Employers would no longer face liability for long periods of paid sick absence for those who have only worked for them for a short period, but many more workers would be entitled to receive SSP.The report also recommends that individuals with a relevant qualifying period should have the right to return to the same or a similar job after a period of prolonged ill-health, similar to the current protection for employees returning from parental leave.

Agency workers

The report recommends that agency workers should have the right to request a direct contract of employment with the hirer if they have been placed with the same hirer for 12 months, with the hirer required to consider requests reasonably.The report also recommends removing the so-called ‘Swedish derogation’ from the agency workers regulations. At present, if the agency engages an agency worker on terms which provide for payment between assignments, the agency worker is not entitled to be paid the same as a permanent member of staff doing the same job after 12 weeks.

Family-friendly rights and flexible working

The report recommends that the Government should review and consolidate guidance on the legislation which protects workers who are pregnant or on maternity leave and consider further options for legislative intervention on pregnancy and maternity discrimination.The Government should also consider how to further promote genuine flexibility in the workplace, for example whether the right to request flexible working should cover temporary changes to contracts.

Employee representation

The report recommends that the Government should examine the effectiveness of the Information and Consultation Regulations, extend them to cover workers and reduce the threshold for employee requests from 10% to 2%. Government should also work with Investors in People, ACAS and trade unions to promote development of better employee engagement and workforce relations.

Transparency and reporting

Government should require companies of a certain size to publish information to:

• Make public their model of employment and use of agency services beyond a certain threshold;
• Report on the number of requests received and agreed to from zero hours contract workers for fixed hours;
• Report on the number of requests received and agreed from agency workers for permanent positions.

Enforcement and employment tribunals

Taylor recommends that there should be a new, fee-free procedure for workers to get a ruling on their employment status from an employment tribunal at an expedited preliminary hearing. The burden of proof should be reversed where status is in dispute so that the employer has to prove the individual is not entitled to the relevant employment rights.

The Government should also create an obligation on employment tribunals to use aggravated breach penalties and costs orders against employers who have already lost an employment status case on broadly comparable facts where further individuals bring claims. Government should allow tribunals to award uplifts in compensation if there are subsequent breaches against workers with the same or materially the same working arrangements.

The Government should take action to enforce tribunal judgments and establish a name and shame scheme for employers who do not pay tribunal awards within a reasonable time.

The report recommends that in the long term HMRC should take responsibility for enforcing holiday pay for those on low pay and the Government should consider whether unauthorised deductions claims should also be state-enforced. HMRC should also take enforcement action to stamp out unaid internships.

Next steps

Although the Queen’s Speech made no specific commitment to bring forward legislation to implement the Taylor Review’s recommendations, it is widely predicted that the Government will take action to implement at least some of the Review’s proposals. However, without a majority, legislation in this area may be difficult to push through. Speaking at the launch of the report today, the Prime Minister said “When I commissioned this report I led a majority Government in the House of Commons. The reality I now face as prime minister is rather different. In this new context, it will be even more important to make the case for our policies and our values, and to win the battle of ideas both in parliament as well as in the country“.