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Radical changes to employment status proposed as government responds to Taylor Review
- 23 Feb 2018
Seven months after Matthew Taylor published his review into modern work – as commissioned by the Prime Minister – the government has published its response and outlined how it plans to act.
It would be churlish to criticise the government for this delay though. Their response has been comprehensive, and they are proposing significant reforms to employment law that could have far-reaching implications on the UK’s labour market and our 4.8 million self-employed individuals.
Defining the undefinable
Like us at IPSE, the government is very worried that ‘ambiguity (around employment status) can be used by unscrupulous employers to justify miscategorising their employees as self-employed for their own financial gain’.
When we gave evidence in front of Taylor and his review panel in 2017, we made the case for a legal definition of self-employment to prevent exploitation. This would give far more certainty for individuals classified as self-employed, and also for those organisations looking to engage individuals on a self-employed basis. We are aware that in some low-paid sectors like cleaning, there has been a huge overnight shift from employment to self-employment – this cannot be right.
Disappointingly, the government has decided that defining self-employment in law would be too radical but instead they will look to legislate on the existing employment status tests around ‘employee’ and ‘worker’. This will be fraught with difficulty and will cause fractious debates as the consultation runs until June.
While the government says it will not define self-employment in law, it does propose legislating to define whether an individual is ‘in business on their own account’, as part of the test for ‘worker’ status. They suggest this could be based on a number of factors, including whether the individual can hire someone else to carry out the work and whether they can negotiate a price for their work. This could be a positive development, with the caveat that the criteria properly reflect the nature of running your own business.
Worrying plans to shift self-employed/worker boundary
Through legislating on the existing employment status tests, it seems Taylor and the government would prefer there to be fewer self-employed people and more ‘workers’, thereby enabling more people to be protected by benefits like holiday and sick pay.
The way they want to do this is by downplaying two of the traditional markers of self-employment – being able to reject work and having the ability to send a substitute. Instead they believe the nebulous concept of ‘control’ should be the only real factor considered. This is a dangerous path to go down, with the intention of shepherding people away from self-employment into the ‘worker’ category.
The unintended consequences of this approach could be dire. The government should be extremely careful about pushing people away from self-employment against their will. A study by the Department for Business, Energy & Industrial Strategy on the gig economy, published on the same day as the government’s response, showed the majority of those involved in the gig economy are satisfied with this way of working, with independence and flexibility the characteristics they are most satisfied with. Ending the flexibility of app-based working would hinder more individuals than it helps.
Aligning tax and employment rights
We will also be analysing very closely the implications of the government’s proposal to align tax and employment rights. This part of the consultation document alludes to IR35 and asks if those deemed employed for tax should automatically get employment rights.
There is certainly merit in simplifying matters by looking to align tax and employment rights and statuses. However, with government seemingly keen to consult on rolling out disastrous IR35 changes into the private sector, IPSE must consider what the interaction between these two pieces of work is, and what we have to do to ensure contractors are backed and not unfairly targeted.
Ensuring work is ‘good’
Aside from the big debates around employment law, “quality as well as quantity” was the dominant refrain running through Taylor’s review and the government’s response. This argument goes that while we have very low levels of unemployment in the UK, we have not paid enough attention to the quality of work and whether it is truly satisfying and enriching. IPSE and most commentators agree this is undoubtedly true, and the challenge is now around how we go about defining and measuring ‘good work’. What makes good employment will not necessarily be the same as good self-employment, with the latter much more about autonomy and flexibility rather than stability.
Taylor’s review was clearly an ambitious and very important piece of work which has shifted the political debate. The government has responded in a thorough way, and now needs to get on and solve the real problems that exist around employment status. They must however be very careful not to do anything that pushes people out of self-employment against their will, hitting our flexible labour market which underpins the UK economy. IPSE will work closely with government throughout this consultation process, ensuring self-employment is recognised as a positive way of working while the minority being exploited are protected.
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