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The Good Work Plan - HRC Law's Update

The Government has finally published its response to the Taylor Review of Modern Working Practices which was published in July 2017.

Despite some of the headlines heralding the biggest reform of employment law in 20 years the document only contains broad statements of intent, rather than “when” and “how” the proposed changes will be implemented.

However, there are some big changes proposed and, unsurprisingly, the changes will have the biggest impact for those using or supplying temporary workers and contractors.

The general bulletin on HRC Law's website summarised the things we now know about the Government’s recently published response to the Taylor Review of Modern Working Practices.

As was explained, some big changes are proposed. Unsurprisingly they will have the biggest impact for those using or supplying temporary workers and contractors. HRC promised detail on these aspects for those in the recruitment sector, and this bulletin sets that out.

HRC Law believe that the following will have the biggest impact on recruitment businesses and the users of their services:

  • Umbrella companies will be regulated by the same body as recruitment businesses, the Employment Agencies Inspectorate. We suspect that this will be welcomed by all compliant businesses as it is likely to tackle unscrupulous umbrella companies and create transparency.
  • From 6 April 2020, workers will be entitled to an enhanced written statement of the main terms and conditions of their engagement or employment from day one of them providing their services. In addition, agency workers will be entitled to a Key Facts Page which, amongst other things, will require an example of how the umbrella’s fees impact on take home pay. An employment business will have to ensure a worker receives this document.
  • There is going to be a new definition of “employment” to make it easier to determine whether an individual is employed or self employed. There is no detail at this stage as to what this will look like or how it will work but we suspect that, in line with the proposed changes to how IR35 is enforced, this will make it more difficult to establish self employment in practice.
  • The likely difficulty in asserting self employment coupled with the removal of “Swedish Derogation” or Regulation 10 of the Agency Workers Regulations from 6 April 2020 will make it more difficult for businesses with a pay parity issue to avoid paying workers/contractors the same as permanent comparators after 12 weeks on an assignment. Depending on how these changes are implemented it’s likely that these will cause the biggest headaches for business.  Our advice would be to review the situation now to identify whether there is a problem with parity pay, the extent of the problem and the cost of tackling it. You will then be ready for when the detail is released to make decisions about how to deal with the changes within your business/supply chain.
  • We have no detail at the moment, but the Government has stated their intention to introduce a right for a long-term worker to request a more “predictable and stable” contract. We do not know what this will look like or how it will work in practice at this stage. Again, all you can do is review the current situation and identify whether you have long term workers providing services so that you can take the necessary action once the timescales and details are known.
  • Holiday pay and SSP will be changing from 6 April 2020.  Holiday pay calculations will now be calculated on the basis of 52 weeks rather than 12 weeks to ensure that those workers with irregular hours don’t miss out on holiday pay entitlement.  Most recruitment businesses will work on the basis of 12.07% of the hours worked which reflects the 52-week calculation period so in practice we wouldn’t expect this to cause major issues other than increasing transparency and ease of calculation.  The awareness campaign, and state enforcement of holiday pay, is likely to have a bigger effect as more workers are likely to be aware of their right to holiday and to take it as meaning that there is unlikely to be the same holiday value in “holiday pots” at the end of a holiday year.

These proposed changes, along with the changes to how IR35 will be enforced from April 2020, means that recruitment businesses will have a lot to deal with over the coming months.

With regards to the IR35 changes in the private sector these will apply to large businesses. This means that the changes will apply to companies which satisfy 2 out of the following 3 tests:

  • Turnover over £10.2 million;
  • Assets or Balance Sheet of more than £5.1 million; and
  • More than 50 employees.

The Government intends to consult on the proposed changes to enforcing IR35 in Summer 2019.  At this stage it is thought that the changes will mirror the changes in the public sector which means that recruiters will need to have a better understanding of the test for determining the status of contractors.

At this stage we are advising our recruitment clients to: (i) review their businesses to assess the extent that they will be affected by the proposed changes; and (ii) to start a dialogue and education process with their clients so that when the detail is known they are ahead of their competitors in being able to deliver solutions and to strengthen their relationships.

HRC Law are specialist lawyers and recruitment is one of their specialisms.

This bulletin contains general overview information only. It does not constitute, and should not be relied upon, as legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter.