The report of the Taylor Review of Modern Working Practices, commissioned last year by the Government, has been published. The proposals concerning the gig economy and zero hours contracts received the most publicity but the 116 page report contained a number of recommendations – including a new, sector-based approach - that, if implemented, will affect retailers. This article examines the relevant proposals.
Employment status
The current three-tier approach (employees, workers and self-employed) should be retained but legislation should clearly set out the criteria for deciding an individual's status. The amount of control exerted by the employer would be more important in establishing worker status and the right to provide a substitute would not prevent someone from having worker or employment rights. An online tool would provide individuals with an indication of their status. Workers who are not employees (worker status currently covers both) would be renamed "dependent contractors". Although most individuals engaged by retailers are employees, these proposals will give more certainty to those who use workers or self-employed contractors.
If these proposals are implemented it may be necessary to carefully review how people who genuinely want to be self-employed contractors are managed so as to avoid the risks of unintended consequences.
Pay
The Government should ask the Low Pay Commission (LPC) to consider introducing a higher national minimum wage (NMW) rate for hours that are not guaranteed, e.g. for workers in the gig economy; the report notes that gig working has the potential to expand into sectors such as retail. The effect of this proposal is that retail workers employed on, say, a two-day-a-week contract who are regularly used as flexible resource to work higher numbers of hours might be entitled to a higher rate for that non-guaranteed work. This proposal would increase costs for those retailers who use such contracts. Dependent contractors should be given the option of receiving rolled-up holiday pay, which would simplify administration where a retailer uses workers.
Tax
The National Insurance contributions (NICs) paid by the employed and self-employed should be more closely aligned and, in time, employers using self-employed staff should pay employer NICs, which would increase costs.
Zero hours contracts
Zero hours contracts (ZHCs) should not be banned because they are flexible, which has advantages for both parties. However, a worker on a ZHC should be able to request a fixed hours contract once in post for 12 months. While it is not wholly clear in the review, it is likely that this would work in a similar manner to flexible working requests and an employer would have to consider such requests reasonably (rather than there being an absolute right to a permanent contract). A number of employers are already making this change voluntarily.
Agency workers
Better information should be given to agency workers about rates of pay and who pays them. Agency workers should be able to request a direct employment contract with their hirer after 12 months (such request would need to be considered reasonably), and the Swedish derogation (under which agency workers can receive less pay than comparable permanent employees if they are paid between assignments) should be banned within the next 12 months. These provisions will have an impact on those retailers who routinely engage agency workers, sometimes for long periods of time.
Sickness and sick pay
Statutory sick pay (SSP) should become a basic employment right, with all workers eligible from day one. It would be payable by the employer and accrue according to length of service. There would be a legal right to return from sick leave, like maternity leave, provided the employee had engaged with the Fit for Work service. These measures could increase retailers' employment costs, although the potential benefit for employers is that new joiners would not be entitled to the full 28 weeks' SSP but instead would receive a lesser amount based on length of service.
Information and consultation
At the moment, an information and consultation agreement must be negotiated if the organisation has at least 50 employees and at least 10% of the workforce requests it. The threshold would be significantly reduced to just 2%, and workers would be included in the numbers. This is likely to mean that a number of retailers who do not currently recognise trade unions would have to inform and consult representatives of workers much more widely than they do now.
Skills and quality of work
When the Government's aim of three million apprenticeships has been delivered, employers should be able to use the apprenticeship levy to fund high quality off-the-job training. There should be a consistent approach to lifelong learning, with a unified framework of skills, and unpaid internships should be abolished. The Review recommends a focus on improving the quality of work, rather than increasing the number of jobs, and making the Business Secretary accountable for this, with annual reports being published from 2018. The LPC would also have to recommend changes to the NMW to improve the quality of work, particularly in sectors such as retail where a large number of people earn the NMW. These proposals would help to plug the skills gap in time.
Flexibility
When the Government evaluates the right to request flexible working in 2019, it should consider how to promote it further, e.g. by allowing temporary changes to contracts. Depending on how often a change is permitted (it is currently once a year), this could increase the burden on employers, but would also help manage situations where the employee's need for flexibility is only relatively short-term, as is often the case.
Reporting
Companies above a certain size would have to report on their model of employment and their use of agency workers, how many requests they had received and agreed to from ZHC workers for fixed hours, and how many requests they had received and agreed to from agency workers for permanent positions. This would add to red tape and other reporting requirements, such as in relation to the gender pay gap.
Enforcement
HMRC should be responsible for enforcing core pay rights, such as the NMW, sick pay and holiday pay. Where a preliminary hearing took place in the employment tribunal (ET) to decide an individual's status, no fee would be payable, and the burden of proof in such cases would be reversed so that there was a presumption that an individual was an employee/worker. Employers who failed to pay ET awards would be named and shamed and enforcement action taken against them. The ET would be able to use aggravated penalties and costs orders against an employer who had already lost a status case on similar facts.
Sector approach
There should be a greater emphasis in the Government's Industrial Strategy on those sectors (such as retail) that employ the most people, with a tailored approach in each sector. This would involve sector-specific codes of practice and guidance and there should be a focus on increasing productivity in the retail, care and hospitality sectors first.
The Prime Minister has said that she will take the review's conclusions seriously. It will be up to the Government how it responds. However, given the current political climate – with Brexit taking up most of the legislative agenda and no Parliamentary majority – it may be a challenge for the Government to implement the proposals.
Karen Plumbley-Jones, is a managing associate (Practice Development Lawyer), at national law firm Bond Dickinson