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Independent Review of Employment Practices in the Modern Economy Published

In November 2016 the Independent Review of Employment Practices in the Modern Economy was launched.

Led by Matthew Taylor, Chief Executive of the Royal Society of Arts, the review was tasked with considering the implications of new models of working on the rights and responsibilities of workers and the freedoms and obligations of employers.   The review team, which in addition to Mr Taylor included the chief executive of the Gangmasters Licensing Authority, the founder of a digital start up company and an employment lawyer, travelled the country speaking to employers and workers in the gig economy, the rural economy and the manufacturing sector.  The review is intended to inform the UK Government's future industrial strategy.

After considerable speculation about the content of the review it was published on 11 July.  Given the focus of media coverage you may be forgiven for thinking that the report was only to address the rights of gig economy workers and zero hours contracts, however its remit was considerably broader.  The calls to ban zero hours contracts and to replace the current three tier system of employment status (employed, self employed and worker) appear to have fallen on deaf ears. However the review has made a substantial number of other recommendations..  The ones that will impact directly on businesses and individuals are:-

  • Primary legislation should clearly outline the tests for employment status with secondary legislation and guidance providing further detail, bringing more clarity to this complex area;

  • The three tier approach to status should remain, but workers should be renamed as "dependant contractors" ("DC") and, significantly, there should be less emphasis on the need to provide work personally to qualify as a DC and a greater emphasis on control.  This will result in more people, who were previously categorised as self employed, becoming entitled to increased rights and protections (including the right to holiday pay and the national minimum wage ("NMW");

  • When re-defining DC status the Government should adapt piece rate legislation, which seems to work effectively in the agricultural industry.  On a practical level it is likely to mean that businesses in the gig economy will need to identify how many "gigs" the average person can carry out in an hour to ensure they are paid the minimum wage;

  • The Minimum Wage Regulations should be amended to make it clear that gig economy workers need not be paid NMW for periods when they are logged on but no work is available;

  • The right to written statements (i.e. the right to a written contract of employment) should be extended to DC's as well as employees to increase clarity, certainty and understanding. They should include a description of statutory rights and be provided on the first day of work;

  • There should be a stand alone right to compensation for a failure to be provided with a written statement;

  • Workers should be treated as employed for tax purposes;

  • Access should be provided to an online tool that would determine status in the majority of cases.  There is already something similar on the HMRC website for use in tax cases;

  • HMRC should have enforcement powers for sick pay and holiday pay in addition to its existing powers in relation to NMW;

  • In employment tribunal cases dealing with employment status it should be up to the employer to prove an individual is not entitled to the relevant employment rights and not the other way around;

  • ET claims regarding status should be dealt with at an expedited preliminary hearing and without the payment of a Tribunal fee;

  • Employers who do not pay tribunal awards within a reasonable period of time should be named and shamed;

  • Tribunals should be able to make punitive awards against employers where they lose multiple employment status claims on similar facts, and uplift compensation for subsequent breaches against workers with the same or materially the same working arrangements;

  • BEIS should have power to pursue the enforcement of tribunal awards;

  • The low pay commission should consider how a higher minimum wage rate could apply to non guaranteed hours;

  • The period required to break continuous service should be extended from a week to a month meaning casual workers will be more able to accrue the service needed to access rights with qualifying periods;

  • Legislation should be amended to improve the transparency of information that must be provided to agency workers both in terms of rates of pay and who is responsible for making payment;

  • Dependent contractors should be allowed to receive rolled up holiday pay.  This means that an element of pay attributable to holiday pay would be included in the weekly wage while DCs were working, but they would not then receive pay during the period they were actually taking holidays;

  • The reference period for calculating holiday pay should be increased from 12 to 52 weeks;

  • Agency workers should be given the right to request a direct contract with a hirer once they have been placed with them for 12 months and the hirer must consider that request in a reasonable manner;

  • Zero hours contract workers should have the right to request a fixed hours contract after being in post for 12 months, with the average weekly hours worked over the previous 12 month period as the starting point for any new contract;

  • Better employee engagement and workforce relations should be worked towards, including by extending the Information and Consultation Regulations so only 2% of the workforce needs to request ICE arrangements be set up;

  • Businesses above a certain size should be more transparent about workforce structure, including the use of agency workers and zero hours contracts;

  • The level of NI contributions paid by employees and the self employed should be moved closer to parity so those in employment don't make a disproportionate contribution, while at the same time entitlements where the self employed lose out, such as parental leave, should be addressed by Government;

  • Steps should be taken to encourage self employment, including via Jobcentre Plus and invest in digital solutions to support the self employed in compliance with their legal requirements;

  • Exploitative unpaid internships should be stamped out by clarifying the law in this area and encouraging enforcement action by HMRC;

  • Genuine flexibility in the workplace should be encouraged, including the possibility of temporary changes being made to contracts rather than the permanent ones that result from flexible working requests at the moment;

  • Guidance on legislation protecting pregnant women and those on maternity leave should be reviewed and consolidated and further options of legislation intervention considered;

  • Statutory Sick Pay should be overhauled.  It should be a basic entitlement from day 1, payable by the employer and should accrue based on length of service;

  • Employees should have the same right to return to the same or a similar job after a prolonged period of sick leave;

The review also contains recommendations for Government and agencies such as the Low Pay Commission and HMRC which are not set out here, particularly around the area of quality of work.

The full review can be found here and it remains to be seen how much of this the UK Government will take forward.