Government announces plans for Labour Market reform

Many of you will have seen the widely reported news this morning across various media outlets that a raft of new employment legislation in the gig economy and agency sectors comes into force today.

Firstly, to reassure all our clients, no such thing is happening.

What has actually happened is that the government has released a consolidated set of responses to the various consultations related to the Taylor Review, in the form of a plan: the Good Work Plan.

The majority of this document simply restates previous announcements and commitments to bring forward legislation in various aspects of the UK labour market. However, there are some aspects that build on earlier announcements and add more detail in some areas, as well as a few new aspirations. Importantly however there is no draft legislation nor even any firm implementation dates for any of the proposed measures as yet. Despite what you may have read elsewhere, nothing has changed today.

Good Work

The plan is described as a “vision for the future of the UK labour market” and covers not just the intention to amend various aspects of employment rights for employees and workers, but also to ensure their effective enforcement.

We will cover individual areas of this plan in more detail in future newsletters, however as a summary of what to expect the headlines from the 64-page document are as follows (we stress that these are all still just statements of intention, and for the most part are subject to Parliamentary approval of legislation that nobody has yet seen):

• Employment status in tax and employment law will be aligned, and the clarity of the employment status test will be improved.
• ‘Worker’ status may be based on a ‘control’ test in the future, although research has been commissioned to find out more about those with uncertain employment status.
• Swedish derogation (a.k.a. ‘Reg 10 contracts’, ‘pay between assignments’ or ‘PBA’) contracts under AWR will be abolished.
• Holiday pay will be enforced by the state for ‘vulnerable workers’ – although there is no definition of what degree of vulnerability is necessary for enforcement to kick in. This will be complemented by a range of awareness campaigns and guidance.
• The holiday reference calculation period will be extended from 12 to 52 weeks.
• Umbrella companies will be policed by the Employment Agency Standards Inspectorate. It is unclear whether EASI will merely deal with complaints or there will be a set of Conduct Regulations similar to those currently imposed upon employment businesses.  The report simply says that the government will “continue to monitor the role of umbrella companies”.  However, on page 41 of the report there is a diagram showing how umbrella companies operate, which describes that the umbrella company deducts something called ‘Employer tax’ as well as ‘Employee tax’ and ‘National Insurance’.  Enough said.
• There will be a new single labour market enforcement agency in 2019. Expect to see the perfect storm of the GLAA, EASI, the HSE and HMRC working closer together.  Something we mentioned in last week’s newsletter.
• All workers and employees will get a day one statement of their employment rights. The information in the day one statement will include matters such as duration of employment, length of notice period, sick leave/pay, maternity/paternity pay, probationary period, any benefits and days/times of work – i.e. very similar to the requirements currently imposed on agencies under the Conduct Regulations.
• All agency workers will get an easy to understand Key Facts Page from their agency to include details of the type of contract they are engaged under, the minimum rate of pay, any umbrella company margin if that is how they are engaged, and a take home pay estimate. How this will actually work is not clear but some sort of supply chain due diligence is proposed.
• All workers and employees will have a right to request a ‘more stable contract’ after 26 weeks of their engagement. This appears to be a right to request more certainty over hours, which presumably will need to be considered reasonably by employers.
• Employers will be banned from making deductions from staff tips so that workers receive them in full.
• The gap between employments required to break continuous service for employment rights purposes will be increased to four weeks.
• The threshold for requesting collective consultation rights will be reduced from 10% of the workforce supporting a request to 2% (minimum 15 employees) of the workforce supporting such a request.
• Better employee engagement will be promoted via Investors in People, ACAS, trades unions and ‘other experts’.
• The ‘quality’ of work in the UK will be measured in the five ‘foundational principle’ areas of: satisfaction; fair pay; participation and progression; wellbeing, safety and security; and voice and autonomy. This will be used to decide whether all the above measures are improving the quality of work.
• There will be enhanced sanctions available in employment tribunals, including an increased aggravated breach penalty of £20,000, sanctions for repeated breaches, and an obligation on employment judges to consider these measures when making awards.

Employment status

One of the most important areas above will be the proposal to align the employment status rules across tax and employment law. This has been a running sore for the government for so long and reform has been suggested so many times in the past that we have long become desensitised to this announcement. Even in this document and at this early stage the language of the proposal is far less robust, referring to ‘ambition’ rather than any concrete action. We shall see.

On topic, what is interesting is that under the government’s proposal to improve the guidance and online tools to help people understand their employment status there is a breakdown of the employment status tests. This breakdown include includes mutuality of obligation “…beyond that of just a contract”. Presumably, nobody ran this document by our good friends at HMRC…