The UK’s gig economy has been booming. In the two years since Theresa May commissioned the review into employment practices in the modern economy, or the Taylor Review, the number of freelancers in the UK has grown substantially and the number of zero-hour contracts has also shot up – rising by 100,000 during 2017. In fact, it’s reported that one in seven UK workers now work for themselves, favouring the flexibility it offers over the traditional 9-5.
The key recommendations to provide ‘good work for all’, as outlined in the Taylor Review, remain highly relevant to address both flexibility and fairness in these modern day work practices and policy makers have highlighted a need for changes in law to properly protect self-employed workers’ rights. So, two years on, what steps has the government taken to better protect the self-employed and promote good work?
In February this year, the government announced that it will ‘take forward’ – meaning at the very least, consult on – all but one of the recommendations made in the Taylor Review. In particular, it has consulted on clarifying individuals’ employment status, hoping to make it easier to determine whether someone is an employee, a worker, or self-employed. The government is also considering legislative options to ensure workers are not fighting for protections they should already have. What’s more, the government has also proposed that all workers should have the right to a statement of day-one rights, including holiday and sick pay entitlements and the right to a payslip. Agency and gig workers will also be provided with a clear breakdown of who pays them and any costs deducted from their wages. In the courts, there have been a number of high-profile gig economy cases regarding employment status, with some claimants successfully establishing that they should be classed as workers (not self-employed contractors) with, for example, minimum-wage and statutory holiday rights.
Looking forward, all signs point to greater protections for gig workers, especially those that are using these arrangements as a primary source of income. However, despite these signs, the government has not yet published its final responses to the Taylor Review in the light of the subsequent consultations. We anticipate there will probably need to be more discussions before any legislation is finalised.
As mentioned above, one of the government’s most publicised consultation areas is clarity for individuals and businesses on the individuals’ employment status, but this is a notoriously difficult issue that many other countries are also struggling with. If it were easy to resolve uncertainty about employment status with new legislative wording, the UK and other countries would have implemented this sort of change many years ago! The Courts and Tribunals are likely to face many more status claims by gig workers before this is resolved – if it ever is.
The above predictions fall under two of the government’s four consultations responding to Taylor – employment status and increasing transparency in the labour. Another consultation topic which is likely to lead to legislation is ‘enforcement of employment rights’. The government may well introduce measures to make it easier for employees and workers to enforce monetary awards made by Tribunals and we predict that the State will likely take a more active role in forcing employers to pay up.
Significantly for employers, we also predict a crackdown in 2019 and 2020 on existing tax avoidance involving certain types of umbrella models, to avoid National Insurance Contributions (NICs). Employers should take the time now to review their supply chains urgently, as the Criminal Finance Act 2017 may in some cases make end users liable for certain very aggressive tax arrangements in their supply chain. And then, in April 2020, there will be a new IR35 tax regime to deal with, which will make users and suppliers of personal service company contractors potentially liable for tax and NICs relating to those contractors who fail self-employment tests.
While there is likely to be significant periods of consultation ahead before any of the Taylor Review recommendations or IR35 reforms are concrete, businesses should be taking steps to prepare now. Business can be confident there is change afoot. Likely developments should be included in business planning as organisations take the time now to review their staffing supply chains, assessing which types of non-employed workers they use across the business and analysing what likely extra costs will apply to each type of worker if the Taylor recommendations are adopted or IR35 reforms introduced, and whether there is existing unlawful tax avoidance or evasion in their supply chains. It’s also a good time to assess the feasibility of new ways of working with people to preserve tax efficiency and prepare for new laws which will make them liable for tax and employment obligations where that control exists.
It will be interesting to see what the world of work looks like in another two years, and to see what legislation has been put in place to support modern working practices. However, employers shouldn’t ‘wait and see’ – those that take action now will find themselves in a much better position come 2020.