In this first of a series of blogs on the Taylor Review, we look at its proposals to create greater clarity around the status of individuals in the UK labour market.
Sticking with the same basic framework
Currently – unlike many other European countries – we have three categories into which a working person can fall: employee, non-employee worker, and self-employed.
Employees are the largest category in the UK labour market and enjoy the full range of employment protection rights. Non-employee workers have the benefit of some of these rights, including paid holidays and the National Minimum Wage, as well as protection from workplace discrimination, but not unfair dismissal or redundancy rights. Self-employed individuals do not enjoy any such rights.
The Taylor Review comes out in favour of sticking with this basic framework, but suggesting a number of ways of improving it.
More detailed statutory definitions
There is currently no statutory definition of an employee – unless you count the circular definition in the Employment Rights Act: someone who has “entered into or works under…a contract of employment”.
There are a number of overlapping definitions of non-employee workers. Broadly speaking, these all require an individual to be engaged under a contract to do work personally, but not as part of any business they are carrying on. Taylor suggests re-naming these workers “dependant contractors”. Certainly the current way of referring to them - “limb (b) workers”- is less than self-explanatory.
Taylor regards it as unsatisfactory that you need to go back to fairly ancient case law (notably the Ready Mixed Concrete case from 1967) to understand what these definitions mean in practice. He recommends that the broad principles established by case law should be consolidated into the statutory definitions.
The Review also suggests changing the definition of non-employee workers/dependant contractors so that there is no longer a requirement for personal service. It concludes that otherwise there is a risk that unscrupulous employers will continue to be tempted to subvert the definition by including bogus substitution clauses.
Amending the legal definitions won’t be enough on its own to increase clarity on the ground. Taylor has a number of recommendations addressing this gap, including a new online tool that would provide an accessible way for individuals to assess their employment status.
He also proposes that all individuals should be entitled to a statement about their status and main terms and conditions from day one. Currently the rule applies only to employees, and not until they have reached two months’ continuous service.
Taylor’s proposals on employment status need to be assessed in the context of the Review’s overall proposals. However they have been greeted with a degree of scepticism by employment specialists.
There is a trade-off between legal certainty in legislation, and the ability to respond to unforeseen changes in society and the economy. Over-prescriptive legislation can date quickly and can take a long time to change.
The question is whether the labour market is best regulated by principles-based legislation (which has been the UK’s approach to date) rather than a detailed code. Taylor’s proposals would represent a modest step towards a more codified approach.
Many would say that the existing legal framework has coped quite well with classifying the status of workers engaged in the emerging the gig economy, admittedly at the price of a considerable amount of litigation, which is still continuing.