Further to our post on the UK Government’s announcement (7 February 2018) of its Good Work plan following the Taylor review of Modern Working Practices published in July last year (the Review), the Government’s full response has now been published (the Response) together with the four consultation documents promised.

The key proposals detailed in the Response and the four consultation documents are set out below.

Employment status consultation 

  • Employment status for employment rights 

In the UK there is currently a three-tier approach to employment status for employment purposes: individuals are either employees; workers; or self-employed contractors. Employment status dictates the employment protection rights to which individuals are entitled. Employees enjoy the full range of employment rights including eligibility for statutory sick pay and protection from unfair dismissal, workers enjoy a more limited set of rights including the right to paid holidays and the National Minimum Wage, whereas the self-employed enjoy none of these rights.

Employment status is determined by a range of criteria established through case law. In light of modern employment practices and new ways of working such as in the so-called “gig economy”, the Review recommended that these criteria be clarified and set out in legislation, so that individuals are provided with more certainty as to their status and related rights.

The employment status consultation seeks views on the main problems with the current employment status system, and asks whether the Review’s recommendation for legislative change and codification of the main principles is the right approach.

If it is, it asks whether the current test for employment status (based on the irreducible minimum of: (i) mutuality of obligation (ii) personal service: and (iii) control) should be codified or should other factors be included?

Alternatively should an entirely different test be introduced, such as one which is based on the German social security model (where a range of criteria are used and if an individual fulfils three out of five conditions, such as dependence on one employer for a long time, he will be classed as an employee); or a simpler test such as the ABC test for contractors used in the States (where an individual is assumed to be an employee unless three main criteria apply: freedom from company control; the contractor performs work outside the usual course of the company’s business or place of business; and the contractor is engaged in an independently established business.)

  • Employment status for tax purposes 

Currently, for tax purposes, there are only two types of work status: employed or self-employed. This means that a worker for employment law purposes who is not an employee, is treated as self-employed for tax purposes.

Whilst tax was not part of the Review’s original terms of reference, it concluded that it was not possible to separate the two issues of employment status and tax entirely, and recommended that renewed effort should be made to align the employment status and the tax frameworks.

On the Review’s recommendations about tax, the Government notes that the current employee/self-employed tax regime has been in place for over two hundred years and moving away from the current test would be a fundamental change. However, they remain open minded and so seek views on whether the boundary between the two tax regimes should be based on something other than when an individual is an employee, and on whether the definitions of “employee” and “self-employed” for tax and employment rights purposes should be aligned.


Consultation on enforcement of employment rights recommendations 

This consultation considers the recommendations the Review made in relation to the enforcement of employment rights and seeks views on a number of proposals including: 

  • The introduction of a new naming and shaming scheme for employers who fail to pay tribunal awards within a reasonable time – it is suggested that this form an extension of the existing tribunal award penalty scheme.
  • Simplification of the enforcement process against employers who fail to pay tribunal awards.
  • Increasing the maximum financial penalty for employers for “aggravated” breach of employment rights from £5,000 to £20,000.


Consultation on measures to increase transparency in the UK labour market 

This consultation considers the Review recommendations in relation to increasing transparency between workers and employers, and seeks views on a number of proposals including: 

  • Extension of the right to a written statement of terms and conditions so that it applies not only to employees (as is now the case) but also to workers.
  • Raising awareness of holiday pay entitlements, for example through social media.
  • For those on non-guaranteed hours, such as zero hours workers, introducing a right to request a contract which guarantees the hours which they usually work.


Consultation on agency workers recommendations 

This consultation considers the Review recommendations in relation to the rights of agency workers and seeks views on a number of proposals including:

  • Introducing a right for agency workers to a clear statement of “key facts” including who pays them and any costs or charges deducted from their wages.
  • The possibility of repealing the existing legislation which allows agency workers to opt out of equal pay entitlements (the “Swedish Derogation”).


Other proposals 

  • Statutory sick pay (SSP) – in response to the Review’s recommendation to reform the statutory sick pay system so that it becomes a basic employment right for which all workers are eligible from day one, and which accrues with length of service, the Government confirms that as part of the reform of SSP currently being considered, a consultation on changes to SSP will be brought forward. 
  • In response to the Review’s recommendations, the Government agrees to ask the Low Pay Commission to consider the impact of higher minimum wage rates for non-guaranteed hours such as those worked by zero hours workers. 

Next steps 

The consultations close on various dates between 9 May and 1 June 2018. After that we can expect further information as to how what steps the Government decides to take on all these matters, and we will of course keep you informed of developments.



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