Matthew Taylor Review
Matthew Taylor Review
Matthew Taylor, Chief Executive of the Royal Society of Arts has completed his review into the gig economy, ‘’Good work: the Taylor Review of Modern Working Practices’. His stated overriding ambition for the review was that all work in the UK economy should be fair and decent with realistic scope for development and fulfilment.
The review was published on 11 July 2017 and runs to some 114 pages with a plethora of suggestions and proposals. A broad overview is set out below, together with a more detailed examination of the review’s key points and recommendations.
In essence, the report does not pave the way for radical reform but makes modest proposals for change. In particular, it argues that the three tier approach – employment, worker and self employment – should be retained whilst recommending that those eligible for worker rights be known as ‘dependent contractors’.
We must now wait to see which of the recommendations the government will make time to take forward.
Taylor highlights six high level indicators of quality of work and attempts in his review to address and improve each of these:
• Employment quality
• Education and training
• Working conditions
• Work-life balance; and
• Consultative participation and collective representation
To achieve these ends, Taylor recommends the following:
• Clarifying legislation. Employment statuses should be distinct and not so open to interpretation. The government should produce a clearer outline of the tests for employment status with secondary legislation and guidance to support. Those individuals eligible for worker rights who are not employees should be renamed ‘dependent contractors’
• Piece rates. The piece rates legislation should be amended to ensure gig economy workers enjoy maximum flexibility whilst earning the NMW
• Written statement. The right to a written statement should be extended to dependent contractors from day one
• Higher NMW. The government should ask the Low Pay Commission to advise on a higher NMW for hours not guaranteed as part of the contract (i.e higher rates for more uncertainty)
• Break in service. The government should extend from one week to one month the consideration of the relevant break in service for calculating the qualifying period for continuous service
• Agency workers. The government should improve by law the transparency of information which must be provided to agency workers both in terms of rates of pay and those responsible for paying them
• Holiday pay entitlements. The government should promote awareness of holiday pay entitlements, increasing the pay reference period to 52 weeks to take account of seasonal variations and give dependent contractors the right to receive rolled up holiday pay.
• Contract of employment for agency workers. A contract of employment should be offered to agency workers who have been with the same hirer for 12 months
• Zero hours contracts. There should be a right to request a contract that guarantees hours that better reflect the actual hours worked
• Information & Consultation Regulations. These should be reviewed to ensure effectiveness in improving employee engagement
• Corporate governance. Proposals should be developed to require companies to be more transparent about their workforce structure
• Umbrella companies and agency workers. The new Director of Labour Market Enforcement should consider whether the remit of the Employment Agency Standards Inspectorate should be extended to cover policing umbrella companies
• Core pay rights. HMRC should be responsible for enforcing the NMW, sick pay and holiday pay
• Burden of proof. The burden of proof in tribunal hearings where status is in dispute should be reversed so the employer must prove that the individual is not entitled to the relevant employment rights
• Penalties. The government should ensure more robust penalties are in place to deal with employers who fail to pay financial awards
• National insurance. The level of NI contribution paid by employees and self-employed people should be moved closer to parity
• Technology. The government should invest time and money in technology, encouraging digital solutions to support self-employed people comply with their legal requirements
• Flexibility. The government should consider whether temporary changes to contracts might be allowed to accommodate flexibility for caring requirements
• Apprentices. An examination of the apprenticeship system should be carried out to see if it can be made to work better for atypical workers
• Internships. Exploitative unpaid internships should be stamped out by the government clarifying the law and encouraging enforcement action by HMRC
• Statutory sick pay. SSP should be reformed so that it is explicitly a basic employment right comparable to the NMW (which applies not just to employees but also workers)
• Right to return to same job. Individuals with the relevant qualifying period should be able to return to the same job on return from sick leave
For more detail on the report, read here:
Key issues facing employment in the British economy
Matthew Taylor and the Review team members believe that the same basic principles should apply to all forms of employment in the British economy – 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 at work.
Quality of Work
The review examines factors that are important to different people and why, in the context of quality of work.
Taylor highlights six high level indicators of quality:
• Employment quality
• Education and training
• Working conditions
• Work life balance; and
• Consultative participation and collective representation
Good work is shaped by working practices that benefit employees through good reward schemes and terms and conditions, having a secure position, better training and development, good communication and ways of working that support task discretion and involve employees in securing business improvements.
The review examines what more can be done to ensure individuals have the opportunity to make the trade-offs, increasing clarity and transparency and addressing power imbalances that, left unchecked, can lead to exploitation.
The Current Labour Market
The review notes that in recent years the UK labour market has been characterised by strong performance. Participation amongst females has been growing more quickly than males over the last twenty years, evening up the proportion of female employees.
Despite the overall strong levels of employment, there is evidence of persistent under-employment. Measures of under-employment, which account for workers who want more hours, remain higher than they were during the most recent recession, despite some improvements since 2012.
The review also notes changes in the degree of part-time working and self-employment although ‘traditional’ full-time employment as an employee as a proportion of total employment continues to dominate the UK labour market.
Permanent employment as an employee accounts for 60% of the total labour market, or 71.2% of employees. Taylor suggests that concerns about the UK’s light touch approach to labour market regulation is leading to increased insecurity may be overstated.
Why the labour market doesn’t work for everyone
The key factor is an imbalance of power between individuals and employers. Where employers hold more power than employees, this can lead to poorer working conditions and lower wage levels.
The imbalance of power at a local level is linked to a second factor of immobile labour. Where individuals are geographically or occupationally immobile this reduces the choice of jobs available to them.
The Review heard evidence that the current employment status framework and the rights of individuals under each status are difficult to understand.
The key labour market challenges
• Poor real wage growth
• Poor productivity
• Jobs to match the skills profile
• New business models (including the ‘sharing’ and ‘gig’ economies)
What can the law do to help/ bring clarity?
Categories of worker
The way in which employment protections are applied relies on individuals and employers understanding the type of relationship that exists between them – most basically, deciding whether the individual is an ‘employee’, a ‘worker’ or genuinely self-employed. This is becoming more complex for an increasing proportion of the workforce.
The report makes the following conclusions:
• The current framework works reasonably well but needs to adapt to reflect emerging business models, with greater clarity for individuals and employers
• The focus should be on clarifying the line between ‘worker’ status and self-employment as this is where there is greatest risk of vulnerability and exploitation
• Further efforts should be made to remove incentives for some businesses to gain competitive advantage by adopting business models which may particularly disadvantage workers
• The aim of a new legislative framework is that the legislation does more of the work and the courts less
Re-examining the law
Taylor states that it will be necessary to re-examine whether the legislation meets the needs of a modern labour market. Getting this right is not just about protecting individuals. Businesses too want to ensure they are operating on a level playing field when complying with their legal responsibilities and not being undercut by less responsible employers seeking to play fast and loose with ambiguous legislation.
Taylor believes there is merit in outlining in primary legislation the high level criteria which need to be met. In order to allow the law to respond dynamically to changing conditions and relevant case law, the detail that underpins these criteria should be specified in a way that can be updated quickly, with a greater use of secondary legislation and guidance.
Clarifying the law
The review urges the government to make the legislation clearer. The employment statuses should be distinct and not open to as much interpretation nor be too ambiguous.
The law should also ensure that where individuals are under significant control in the way they work, they are not left unprotected as a result of the way their contract is drafted. It should not be as difficult as it is now for ordinary people to seek clarity on employment status.
The recommendations in more detail
Establishing employment status
The government should replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation with secondary legislation and guidance to provide more detail.
The report argues that the three tier approach – employment, worker and self employment – should be retained. However, the approach is confusing and the two categories of people that are eligible for ‘worker’ rights should be easier to distinguish from one another. The report recommends that the government should introduce a new name for those eligible for worker rights – ‘dependent contractors’.
There should be a clearer distinction between an ‘employee’ and a ‘dependent contractor’. The status of dependent contractor should have a clearer definition which better reflects the reality of modern working life. To do this, the government should look at the test for worker status. The report thinks that it is important for government to ensure that the absence of a requirement to perform work personally (e.g. a right to substitution clause) is not an automatic barrier to accessing basic employment rights.
Taylor believes that placing greater emphasis on control and less emphasis on personal service will result in more people being protected by employment law.
In developing legislation, the government should provide maximum clarity on status and rights for all individuals by extending the right to written particulars to all in employment.
Line between self-employment and new ‘dependent worker’
Whilst self-employment is not an employment status the government should aim for ‘self-employed’ to mean the same for both employment rights and tax purposes.
The dividing line should be between the new dependent contractor status and self-employment. The government could also consider how tax tribunal and employment tribunal rulings could be applied across jurisdictions.
The government should also ask the Low Pay Commission to advise on a higher NMW for hours not guaranteed as part of the contract
The review also recommends that the government should extend from one week to one month the consideration of the relevant break in service for calculating the qualifying period for continuous service and clarify the situations where cessations of work could be justified.
In re-defining ‘dependent contractor’ the government should adapt the piece rates legislation (contained in the National Minimum Wage legislation) to ensure that those working in the gig economy are still able to enjoy maximum flexibility whilst being able to earn the NMW.
Digital platform based working (e.g. where workers log on to work via an app) offers opportunities for genuine two way flexibility and platforms should be able to compensate gig economy workers based on their output, provided they are able to demonstrate through the data that they have available, that an average individual, working averagely hard, successfully clears the NMW with a 20% margin of error.
If an individual knowingly chooses to work through a platform at times of low demand, then they should take some responsibility for this decision.
Taylor recommends that the government must take steps to ensure that flexibility does not benefit the employer at the unreasonable expense of the employee and that flexibility is genuinely a mutually beneficial arrangement.
The government should ask the Low Pay Commission to advise on the impact of bringing in a higher NMW for hours which are not guaranteed in a contract.
The government should intensify their efforts in communicating who is entitled to holiday pay. The pay reference period should be increased to take into account the seasonal nature of much casual and zero hours work. The report believes this should be extended to 52 weeks.
Individuals should also have greater choice in the way in which they receive paid annual leave: individuals should have the choice to be paid in real time (rolled up holiday pay). Clearly there would be hurdles in the way of the latter, given that the recommendation is contrary to case law under the Working Time Directive and Working Rime Regulations.
Zero hours contracts
The government should act to create a right to request a contract that guarantees hours which better reflects the actual hours worked, for those on zero hour contracts who have been in post for 12 months.
The Review believes that for work to be fair and decent workers must have a voice. The government should introduce new duties on employers to report and bring to the attention of the workforce certain information on workforce structure. The government should require companies beyond a certain size to:
• Make public their model of employment and use of agency services beyond a certain threshold
• Report on how many requests they have received from zero hours contracts workers for fixed hours after a certain period
• Report on how many requests they have received from agency workers for permanent positions with a hirer after a certain period
The government should:
• Draw on expert bodies to drive a much greater push on what constitutes good workplace relations, especially in sectors with high instances of low pay or atypical work
• Review the effectiveness of the Information & Consultation Regulations in driving good employee engagement in the workplace
• Develop proposals to require companies to be much more transparent about their workforce structure
The new Director of Labour Market Enforcement should consider whether the remit of the Employment Agency Standards Inspectorate should be extended to cover policing umbrella companies and other intermediaries in the supply chain.
The government should introduce a right to request a direct contract of employment for agency workers who have been placed with the same hirer for 12 months, and an obligation on the hirer to consider the request reasonably.
The review also notes that it is too easy for employment businesses and umbrella companies to avoid paying workers between assignments. Dealing effectively with abuses of pay between assignments contracts will go a long way towards protecting agency workers. The report recommends that the government should repeal the legislation that allows agency workers to opt out of equal pay entitlements and extend the remit of the EAS Inspectorate to include compliance with the Agency Worker Regulations.
Enforcement of basic protections
HMRC should take responsibility for enforcing the basic set of core pay rights that apply to all workers – NMW, sick pay and holiday pay.
Employment tribunal fees
The review believes that a judgment on status should not require tribunal initiation and hearing fees to be paid. A determination on status at a preliminary hearing should not attract any fees and after the preliminary hearing the individual will have the ability to make an informed choice as to whether to progress their substantive case to the next stage, where the usual fees would apply.
The burden of proof in ET hearings where status is in dispute should be reversed so that the employer has to prove that the individual is not entitled to the relevant employment rights.
The report also recommends that ETs should routinely apply penalties and award costs should subsequent cases be brought by individuals working under broadly comparable arrangements where the company has not taken steps to apply an initial court ruling.
Incentives in the system
The review believes that self-employment is a component part of the UK labour market and should be taxed neutrally.
The review believes that the principles underlying the proposed national insurance reforms in the spring 2017 budget are correct. The level of NI contribution paid by employees and self-employed people should be moved closer to parity while the government should also address remaining areas of entitlement where self employed people lose out.
The government should actively support technology that helps ensure self-employed people have the opportunity to come together and discuss the issues that are affecting them, working with employers to make sure this is positively encouraged.
The government should invest time and money in technology, encouraging digital solutions to support self-employed people comply with their legal requirements.
Interns and apprenticeships
The review does not believe a separate ‘intern’ status is necessary but the government should ensure that exploitative unpaid internships are stamped out.
As the new apprenticeship system beds in, the government should examine how it could be made to work better for those working atypically, including through agencies. The government should consider making the funding generated by the levy available for high quality, off-the-job training other than apprenticeships.
As part of the statutory evaluation of the Right to Request Flexible Working in 2019 the government should consider how further to promote genuine flexibility in the workplace. For example it should consider whether temporary changes to contracts might be allowed, to accommodate flexibility needed for a particular caring requirement.
Pregnancy and maternity
The government should review and consolidate in one place guidance on the legislation which protects those who are pregnant or on maternity leave to bring clarity to employers and employees. If there is insufficient culture change the review states that the government will need to move to more directive measures.
Disability and health
The review recommends that the relevant government departments explore ways of supporting and incentivising local authorities to develop integrated approaches to improving health and wellbeing at work.
Statutory sick pay
The review recommends that the government make regulatory changes to support people with long-term health conditions to remain in quality work. It believes that there should be a basic set of employment rights which should apply to all those who are not genuinely self-employed. It also supports reform of the current system of SSP which should be available to all workers from day one of employment. It also believes that access to a basic level of income replacement when a person is unable to work through illness should be part of the reforms. The review recommends that individuals should have the right to return to the same or similar job after a period of prolonged ill health conditional on engagement with the Fit for Work Service when an assessment has been recommended.
Taylor recommends that the government place equal importance on the quality of work as it does on the quantity by making the Secretary of State for Business, Energy and Industrial Strategy responsible for the quality of work in the British economy.
The review believes that the role of the Low Pay Commission should expand to improve the quality of low paid work. It should work with experts as well as business groups and trade unions and make recommendations to government if changes are needed. It should also work with employers and worker representatives to ensure sector-specific codes of practice and guidance are developed to support the provision of quality work.