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Freshfields Risk & Compliance

| 3 minutes read

The Future of Work - UK Government's response to the Taylor Review delivers little, at least in the short term

As you may have seen in the Press, the UK Government has published its long awaited response to the Taylor review. The ‘Good Work’ response asks more questions than it answers, with almost 150 consultation questions set out in its four consultation papers.

Very few of the Taylor Review’s recommendations are accepted, and, even where they are, the Government is, in most cases, consulting on how best to implement them.

The clearest indications of action are, unsurprisingly, on the least controversial topic – that relating to the enforcement of employment rights. The acceptances here include:

  • that HMRC should have a wider role in enforcing core pay rights – its current enforcement role in relation to national minimum wage will be extended to include sick pay and holiday pay for the lowest paid workers;
  • that the enforcement process for employment tribunal awards could be simplified and that a naming and shaming scheme (similar to that for the national minimum wage) should be introduced for employers who fail to pay tribunal awards within a reasonable time;
  • that the penalty for aggravated breach of employment rights should be increased to £20,000 and the legislation amended to make it an aggravating factor where there is a second offence in relation to an employment law breach, with the aim of discouraging employers from continuing non-compliant working practices after they have already lost a tribunal claim arising out of those practices.

On the difficult question of employment status, the Government accepts that there is a compelling case for greater clarity but seems unsure as to whether it would be best to define employment status fully in legislation or adopt an alternative approach – here the response suggests that an online tool might decide employment status or at least assist in doing so. The consultation on employment status is comprehensive with question after question aiming at pinning down exactly how employment status should be defined in legislation or whether it would be preferable for it not to be. If the Government does decide to codify an employment status test, we would not expect any legislation to come into force until mid-2019 at the earliest, after any proposed legislation has itself been consulted on.

While some were hopeful that the Government might announce an overhaul of tax legislation to bring alignment to the worlds of employment law and tax, there seems a notable absence of enthusiasm from the Government for change in this area, at least at the moment - the question of alignment merited only two questions in the consultation paper. Perhaps the prospect of tax legislation reform is too much for the Government to contemplate when so much of its energy is directed at Brexit negotiations.

One area where the Government did seem keener to take action was in relation to atypical and agency workers. The Government is clear that employment law should work to support and maintain a flexible labour market but stresses the importance of improving security and clarity for workers. The Government proposes to achieve this through a variety of methods:

  • a higher rate of national minimum wage may apply to non-guaranteed hours. The Low Pay Commission has been tasked with conducting research into the likely impact of this proposal. If this is followed through, low paid zero hours workers would receive more pay for non-guaranteed hours, which may result in a reduced use of zero or low hours contracts;
  • agency workers should be given a ‘key facts document’ when they start their engagement which specifies who is responsible for paying them, how they are being engaged, what deductions are being made and for what reason. The Government is also consulting on whether the legislation which allows agency workers to opt out of equal pay entitlements (the ‘Swedish derogation’) is being abused and should be repealed. If it is, this may make it more expensive and therefore less attractive to engage staff through agency arrangements;
  • workers should have the right to request a more predictable and stable contract and a right to a written statement of terms when they start their employment;
  • extending the period for which employees can take a break in service without breaking their continuous employment for the purpose of qualifying for employment rights (currently set at one week) – the Government is consulting on how long the permitted break should be. An increase in the permitted break will lead to more individuals in casual employment arrangements acquiring service-based statutory employment rights;
  • the reference period for holiday pay calculations for workers without normal working hours will be extended from 12 weeks to 52 weeks. This will allow workers in business sectors which have seasonal fluctuations in work to be more fairly compensated when on holiday and also remove any pressures they may be under to take their holiday at a time when it is least expensive for the employer.

For our briefing on the Taylor Review report, please click here..


taylor review, agency workers, atypical working, zero hours contracts, fintech