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Employment Status following the Taylor Review

Posted on 20th July, 2017

Employment Status has become a key issue over the last year. The employment team at Jacksons have been following developments with interest and reporting on high profile cases in this area including Pimlico Plumbers Ltd & Mullins v Smith 2017 and Aslam & Farrer v Uber & others.

There are three statuses presently; Employee, Worker, Self Employed. The principles by which status is determined are laid down in case law and there is presently scope for both genuine uncertainty and cynical exploitation of individual rights.

The Taylor review was launched by the Government at the end of 2016 to consider the implications that new ways of working have on the rights of workers and the obligations of employers. The review was published on 11 July.

The single overriding ambition of the review is said to be that all work in the UK economy should be fair and decent with realistic scope for development and fulfilment.

As such the recommendations the review makes our concentrated in three areas:-

  • Tackling exploitation in the workplace.
  • Increasing clarity in the law for business owners and individuals and helping individuals know and exercise their rights.
  • Over the longer term aligning the incentives driving the labour market with a modern industrial strategy and broader national objectives.

The review recognises that the UK labour market is changing, self-employment is rising, innovative forms of working call into question the established norms and how the current legislative framework fits with these developments.

Personal service, control, mutual obligation and whether the individual is carrying on a business undertaking are currently treated as the main factors that govern whether an individual is an employee, or in business on their own account. The review calls for these criteria to be inscribed in legislation to aid clarity and certainty for businesses and individuals.

The review calls for the current approach to employment status categories (employee, worker and self-employed) to be replaced with two categories of employed and self-employed, similar to the tax system.

But it also recommends introducing the term “dependent contractor” to refer to those who have an intermediate “worker” status but who do not have full “employee” rights.

The review considers this category of worker to be the group most likely to suffer from unfair one sided flexibility as whilst it recognises that there are benefits for some individuals of being free to choose which jobs to accept or decline, there will be times when labour supply outstrips demand and as such the review suggests that gig economy businesses should use the data at their disposal to provide individuals with an accurate guide to their potential earnings if they sign in at any given time. The rules that apply to “output work” under the NMW Regulations could be adapted so that workers would be entitled to a piece rate for platform work but would have to take some responsibility for choosing to work at times of low demand.  Individuals should not be able to log on to an app when they know that there is no work and still expected to be paid a minimum wage.

The review calls for the definition of self-employment for employment law and tax purposes to be aligned so that being employed for tax purposes would mean that an individual is either an employee or a dependent contractor and where a tax Tribunal determines that an individual is an “employee” for tax purposes, that decision would be binding on Employment Tribunals for employment law purposes.

The review makes a number of other recommendations for improving employment protections for non-employees. Among the most significant are the following:

  • Dependent contractors should have the right to a written statement at the start of their engagement, similar to that currently enjoyed by employees, backed up by a standalone right to compensation for failure to comply.
  • 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, so that businesses can continue to use zero and short hours workers but will pay more for their flexibility.
  • In order to improve access to holiday pay for seasonal, casual and zero hours workers, the pay reference period should be increased from 12 to 52 weeks.
  • Individuals should have the choice to be paid “rolled up” holiday pay, receiving a premium on their pay instead of paid time off.
  • Agency workers should have the right to request a direct contract of employment after 12 months with the same hirer, which the hirer will be obliged to consider reasonably. Similarly, zero hours workers should be entitled to request a contract that guarantees hours which better reflect their actual hours worked after 12 months.
  • Statutory sick pay should be reformed so that it becomes a basic employment right, comparable with the NMW. However the right should accrue on length of service so that employers do not have to give the full 6 months of SSP to individuals who have only worked with them for a short time.
  • Individuals should be able to have their employment status determined by a Tribunal without having to pay a fee. The burden of proof in cases where employment status is in dispute should be placed on the employer, which will have to prove that the Claimant is not entitled to the employment rights claimed.

Whilst the above are all only recommendations at this stage this is clearly an area in which we expect to see continued challenge in the courts in the short term by individuals who are unhappy with their employment status and in the longer term, legislative change. To guarantee that your business is on a sound footing Jacksons have developed the Business Solutions Package for SME’s and start-up businesses.  

For further information or advice on any of the issues raised please feel free to contact any of the team:                01642 873 727                 01642 356 510                   01642 873 758                  0191 206 9626




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