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Employment Status, Where Do We Stand Post-Budget and the Taylor Review?

In July 2017, Matthew Taylor delivered his much anticipated report “Good Work: Modern Working Practices” which contained a number of proposals and ideas and recommendations for changes to employment status. 

The report’s recommendations aim to improve the quality of the work undertaken, which is hoped will increase wages, boost productivity and raise the level of workers’ skills.  This is set against a backdrop which recognises that flexibility in the UK labour market (“the British way”) is a positive feature that should not be undermined, as it has resulted in record high levels of employment and the fifth most flexible labour market in the world. 

Of particular interest to recruiters, Taylor’s key recommendations focused on worker rights and enforcement of those rights.  In particular the report recommended that the current worker status is changed to “dependent contractor” with the key test being control rather than personal service.  Dependent contractors would be entitled to receive the National Minimum Wage (NMW) but there would be more flexibility on calculating that rate for workers in “on demand” industries such as delivery drivers.

For agency workers, it was recommended that the Swedish derogation end and that agency workers with twelve months continuous service at the same end user would be able to request moving to permanent employment with that company.

While the report did not recommend abolishing zero hours contracts, it did recommend that workers under those contracts with twelve months service at that employer would be entitled to request a minimum number of hours.  As with the agency workers recommendation above, this would only be a right to ask rather than a right to change.

The report proposed a greater alignment of employment status for tax/NIC with the employment law definition (although still maintaining the two statuses for tax/NIC – employed/self-employed and the three for employment law – employed/worker/self-employed).  It also suggested methods should be introduced for the self-employed to making paying tax easier. 

To recognise the role tax plays with employment status, greater enforcement power to HMRC was recommended to cover not just tax but other employment related rights and similarly it was proposed that the role, remit and powers of the Gangmasters and Labour  Abuse Authority should be strengthened.

Since then the report has been debated in Parliament, in particular the Work & Pensions committee who published a report in November 2017 building upon Taylor’s recommendations.  While they did not support greater flexibility in the NMW, their recommendations included workers at certain sized businesses being deemed to be entitled to employment rights where they are sought.  In other words where workers claim employment rights these will be implied by default and it will be for the company to prove there are not workers rather than the current approach where the onus of proof is on the worker. There were also suggestions of greater representative powers such as the greater ability to use class actions and a reduction in the threshold for Information and Consultation of Employee council requests from 10% to 2% with workers also counted as “employees” for the purpose of the threshold.

Although the 2017 Autumn Budget was delivered shortly after the Work & Pensions report above, there was actually little comment on either of the reports.  Instead the Government announced it will be publishing in “early 2018” a discussion paper which will explore the case and options for longer term reform with a particular focus on greater clarity on employment rights and tax although the announcement was light on actual details.  As of 24 January, this discussion paper has not been published and no announcement has been made confirming publication date.

In addition to Government legislation, there is currently a private member’s bill progressing through Parliament which is designed to provide a “single status” for workers and employees (i.e. ending the distinction) and further restricting the use of zero hours contracts.  The bill is due for debate in the House of Commons by the end of April.  As it is a private member’s bill not introduced by a member of the Government party and without any indication of Government support, it is unlikely the bill will become law.

Despite a number of reports and publications, it is clear the world of employment status after recent upheavals (such as off-payroll working in the public sector) remains in a state of flux but also still awaits further clarity on the direction of travel.  Until such time as the promised consultations are published, uncertainty remains and it is impossible to give a firm forward looking answer to the question “what does the future hold for employment status?”.

For further updates on the Taylor Review, see Press Release published today, 7 February,


Rob Woodward –