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13 February 2019
In November 2016 the government launched the Independent Review of Employment Practices in the Modern Economy. The review's purpose was to consider the implications of new working models, including those used in the gig economy, for the rights and responsibilities of companies and individuals. In July 2017 Matthew Taylor completed an extensive review of modern employment practices and in July 2017 he published his report: Good Work: the Taylor Review of Modern Working Practices. Now, 18 months on, the government has published details of its Good Work Plan, which sets out proposals to reform employment law in various areas.
Many of the proposals in the Taylor report could significantly affect employers, including with regard to matters such as:
When the government published its initial response to the Taylor report in February 2017, it promised action on nearly all of the review's 53 recommendations.
Four consultation documents were published alongside the government's response. These dealt with:
These consultation documents largely focused on seeking views on the details and the impact of the potential changes, rather than committing to any specific law changes.
The Good Work Plan has now been published. It sets out the government's considered position on the Taylor recommendations and it has been described as the government's "vision for the future of the UK labour market". However, it largely remains a mere list of proposals, accompanied by some (but not all) of the draft legislation. To date, there are no firm dates for when many of the reforms will take effect or many indications of what the important legislative detail will look like.
Employment status clarification
The government has said that it will "bring forward detailed proposals" on how the employment status frameworks for the purposes of employment rights and tax should be aligned. There will also be legislation to "improve the clarity of the employment status tests". This has the potential to be significant, but to date there has been no further information about what this will involve or any draft legislation. At present, this is a key area of difficulty for both employers and employees, but finding a solution is far from easy as the tests have been developed through case law and tend to be fact specific, as shown by the Supreme Court's decision in Pimlico Plumbers (for further details please see "Supreme Court confirms Pimlico Plumbers are workers"). As noted in the plan, "defining employment status and ensuring our legislation is fit for purpose in a changing world is not straightforward". The government has commissioned further independent research on those with an uncertain employment status to help with this task; therefore, it would appear that detailed proposals are not imminent.
New right for workers to request more predictable and stable contract
The new right would allow workers who work variable hours to ask for a fixed working pattern after 26 weeks of service (eg, minimum hours or fixed working days). However, the plan simply provides for a right to make such a request; it does not suggest that employers will have to agree. The new right may be subject to specific rules similar to those which currently apply to the right to request flexible working. The United Kingdom was likely to be required to adopt such a law anyway under the proposed EU Transparent and Predictable Working Conditions Directive (subject of course to Brexit developments).
Extension of relevant break in service for calculation of continuous service qualifying period
The plan proposes to extend the relevant break in service for the calculation of the continuous service qualifying period from one week to four weeks. This is designed to help those who work intermittently for the same employer and find it difficult to build up employment rights.
Removal of Swedish derogation in Agency Workers Regulations 2010
The Swedish derogation currently allows temporary work agencies to avoid matching pay by engaging agency workers in a way that allows for pay between assignments. The draft regulations will remove this provision from 6 April 2020, including the obligation on agencies that have previously used the opt-out to provide a written statement to all affected agency workers explaining the change. Under the plan, this type of contract will be banned. There will also be protection from unfair dismissal or detrimental treatment for enforcing these new rights.
Ban on employers making deductions from staff tips
This ban will ensure that workers receive all of the tips that customers leave for them. This will presumably be done by amending the rules on unauthorised wage deductions.
Extension of right to statement of employment particulars
This right currently applies only to employees and the statement can be provided up to two months into employment. The Good Work Plan intends to extend the right to a statement of employment particulars to all employees and workers from day one. The information in this statement will also be expanded, covering matters such as probationary periods and family leave. Two sets of draft regulations have been published,(1) which indicate that the new rights will apply to employees and workers who begin employment on or after 6 April 2020. There is a related proposal for a key facts page for all agency workers, which will provide basic information about:
Increased reference period for holiday pay
Currently, workers without normal working hours have their holiday pay calculated based on the previous 12 weeks. The government is concerned that this can result in workers losing out if they take holiday at certain times of the year (eg, seasonal workers). The relevant calculation of one week's pay is used for various purposes and is taken from the Employment Rights Act 1996. Under the draft regulations, which are due to come into force on 6 April 2020, the government proposes to amend the Working Time Regulations to replace the relevant references to 12 weeks with 52 weeks in holiday pay cases. The government is also planning an awareness campaign and new guidance to ensure that workers understand their holiday rights. In addition, there will be a new state enforcement system for holiday pay – although the body responsible for this has not yet been identified.
New 'name and shame' scheme
The Department for Business, Energy and Industrial Strategy (BEIS) has published details of a 'name and shame' scheme for employers which fail to pay employment tribunal awards. It will be linked to the existing BEIS penalty scheme, which allows individuals to ask for the enforcement of unpaid awards through an additional penalty payment. If individuals register with the penalty scheme, they will also be able to register with the naming scheme. This means that the effects may be limited, as employers which are not being pursued under the penalty scheme will not be subject to the naming scheme either. A naming round will take place every quarter, which will show the name of the employer and the amount of the unpaid award. There will also be a guidance review on how to enforce awards, with a vision of building a seamless end-to-end digital system for the entire lifecycle of an employment tribunal claim.
Stronger penalties and greater use of aggravated breach penalties and costs orders
Under the draft regulations, the current limit on financial penalties for aggravated breaches by employers will be increased from £5,000 to £20,000 for breaches of rights beginning on or after 6 April 2019. There will also be new guidance on how to encourage the use of these powers. To date, few penalties have been imposed, so it is unclear how increasing the limit will make a difference if parties are unwilling to ask for this and judges are reluctant to impose a penalty that goes to the government rather than the employee. There are also plans for new penalties in respect of repeated breaches by the same employer, with an obligation on judges to consider their use. No further detail is provided, as there will be further consultation with interested parties.
Lowered threshold for request to set up information and consultation arrangements
The Good Work Plan will lower this threshold from 10% to 2% in order to make the right to information and consultation more accessible and to recognise the benefits of giving employees a voice. The 15-employee minimum threshold will be retained. The draft regulations indicate that this will come into effect from 6 April 2020.
Although the Good Work Plan addresses all of the Taylor Review recommendations, it is short on detail as to how or when the biggest reforms will be implemented. There is also little discussion on the outcome of the four related consultation exercises. The full set of responses to three of the four consultations have been published online. Although the relevant pages say that the plan draws on this feedback, there is no explanation as to how it has been taken into account.
While the plan provides useful information on what is likely to happen, it is too early for employers to do much to prepare. The draft regulations that have been published so far are relatively straightforward and most changes will not come into effect until April 2020 at the earliest. Draft legislation and firm timings are needed for the more significant changes relating to employment status and the right to request a more predictable contract.
For further information on this topic please contact Michael Burd at Lewis Silkin by telephone (+44 20 7074 8000) or email (firstname.lastname@example.org). The Lewis Silkin website can be accessed at www.lewissilkin.com.
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