August 15th, 2017 / Insight posted in Articles, Blog

The Taylor Review – new employment laws for a modern economy?

The long awaited “Good Work” Report was published on 11 July 2017.

The Government is on board with the aims of the report i.e. reforming employment law so that it better protects individuals providing services within the gig economy.

The gig economy is a labour market which predominantly uses self-employed contractors and workers, not employees.  Some very high-profile cases have recently placed this type of arrangement under the spotlight, with courts tending to find that individuals described by their employers as self-employed were, in fact, workers and entitled to certain employment rights.

Clearly a balance needs to be struck between the right and desire of some individuals to work flexibly and the scope for this business model to deny individuals their employment rights if their employer incorrectly labels them as self-employed contractors – whether that mislabelling is the result of a misunderstanding or a deliberate effort to avoid employment liabilities. This is where the Taylor Report comes in.

It is difficult to detail all of the recommendations of the Report in this short article, but here is a snapshot of some of the key recommendations:

  • “Worker” status should be replaced by a new employment status of “dependent contractor”.  When deciding whether someone has this new status, the test will focus on what degree of control the employer exercises over the individual, whereas previously the emphasis was on whether the individual was required personally to do the work.  New rights will be given to dependent contractors, such as the right to a written statement of terms and conditions from day one of their engagement, and new legislation should provide clarity on how the various employment statuses are defined.
  • The Government should adapt legislation to ensure those working in the gig economy can work flexibly while earning the National Minimum Wage or National Living Wage, as appropriate.
  • New rules should make it easier to accrue continuous employment, including a rule that breaks of up to one month will not break continuity of employment.
  • The pay reference period for calculating holiday pay should change from 12 to 52 weeks.  This would be a better reference period than 12 weeks for businesses that have seasonal variations in work. We hope that guidance will also be issued about the reference period to use when calculating holiday-related overtime and commission-related pay.

We don’t know exactly which proposals the Government will take forward at this point.  They will need time to review the recommendations and plan to comment further at the end of the year.

We welcome the aim of bringing in a wide-ranging reform of employment law to enable the relationship between companies using more modern business models, and the individuals who provide services to them, to be regulated more effectively. Bringing clarity to some areas that often cause confusion for employers will also be a big improvement.

From an employer’s point of view, however, this means that, if they use self-employed contractors or workers, they could be at a heightened risk of litigation about employment status.

With the abolition of employment tribunal fees creating an increased risk of claims, the developments of July 2017 are perhaps timely reminders of the need for employers in this position to review workforces. They must ensure that everyone’s employment status is categorised correctly under the current rules and that all individuals are receiving the full legal protections they are entitled to. This will help to reduce the risk of backdated claims while we await further information from the Government about which measures they intend to take forward from the Taylor Report.