What the UK Government’s announcements mean for the Gig Economy

  • 8th February 2018
What the UK Government’s announcements mean for the Gig Economy

The UK Government has published its long-awaited response to the Taylor Review of Modern Working Practices in an attempt to move the political focus away from the overwhelming Brexit agenda and onto a theme – “good work” – that Theresa May has repeatedly tried to embrace since becoming Prime Minister.

Overall, the response marks a tentative shift in Tory policy: while flexibility and dynamism are still regarded as pivotal for the success of the UK labour market, the Government also acknowledges that low pay, poor quality jobs, insecurity and a lack of protection for some workers do require stricter parameters and greater state intervention.

To address those issues, the Government’s proposed actions target in particular the situation of those people in the labour market who are classified as ‘workers’. This includes workers on zero-hours contracts, agency workers, workers operating off the back of digital platforms, or those who are currently classified as self-employed but who should be treated as workers in the future.

The underlying objectives of the proposed reforms include a greater commitment from employers and work providers, including platforms, to “quality jobs”; greater clarity, if necessary through changes in primary legislation, of the employment status for platform-based workers; and raising the level of protections for flexible workers.

Besides the headlines on stricter enforcement and higher penalties, the Government approach is largely consultative, and therefore meaningful action will be deferred until after these processes are complete. Most pertinent, in this regard, is the consultation on employment status, which will examine whether to re-classify the worker status as ‘dependent contractor’, primarily based on the control exerted by the employer or platform.

Key actions from the Government:

  • Extend the right to a written statement of the particulars of employment to workers as well as employees. Consult on how best to do this and what information the statement should include.
  • Amend legislation to improve the transparency of information that must be provided to agency workers regarding rates of pay and those responsible for paying them.
  • Table legislation to extend the right to a payslip to all workers, requiring that employers state the hours being paid for.
  • Develop an online tool that will determine employment status in the majority of cases, following final decisions on the legislative framework.
  • Raise the maximum penalty available to employment tribunals for aggravated breach (if an employer has already lost an employment status case on broadly comparable facts) from £5,000 to at least £20,000 as soon as practicable.
  • Develop a set of metrics against which to measure success, reporting annually on the quality of work on offer in the UK, as part of a wider programme on what constitutes ‘good work’.
  • Re-consider the relevant break in service for the calculation of the qualifying period for continuous service beyond one week, and consult on changes to clarify the situations where cessation of work could be justified.
  • Extend the remit of the Employment Agency Standards Inspectorate, subject to the conclusions of the Labour Market Enforcement Director.

Areas of further consultation:

  • Consult on options for reforming the legislative framework of employment status, in particular what the tests should be to determine a worker, and whether to adopt ‘dependent contractor’ as the name for the category of people who are eligible for worker rights but are not employees.
  • Examine how working time should apply to those in the gig economy who are eligible for the National Minimum Wage (NMW).
  • Consult on the state taking responsibility for enforcing the basic set of core rights, including holiday leave and sick pay, on behalf of the most vulnerable workers.
  • Ask the Low Pay Commission to consider the design and impacts of introducing a higher NWM rate for hours that are not guaranteed as part of the contract.
  • Work with key stakeholders over the coming months to investigate the potential for a WorkerTech catalyst.
  • Publish a call for evidence on what more digital platforms could do to ensure their users are compliant with the tax rules.
  • Consult on Swedish Derogation contracts and the role of the Employment Agency Standards Inspectorate.
  • Monitor the impact of corporate governance reforms to see if further steps are needed.
  • Launch a joint taskforce with industry on flexible working.
  • Consult on a ‘naming and shaming’ scheme for employers who do not pay employment tribunal awards within a reasonable time, and on extending the use of sanctions.
  • Monitor the implementation of GDPR to see if further action is needed to ensure that approval ratings are transferable.

What are the potential consequences for players in the on-demand economy?

Much will depend on the outcome of the consultation processes and the extent to which the government will see through its legislative agenda. Consideration should be given to new compliance requirements; how the degree of choice will be affected; and how the incentive structures for different employment models are likely to change.
Depending on the final definition formulated, a move towards using the control exerted by an employer or platform as the primary test of employment status would likely mean that more people are captured by the worker/’dependent contractor’ status, including some who are currently self-employed.

This would require platforms to guarantee the attendant rights to sick pay and holiday leave. As the government has suggested extending these rights, platforms and employers would also have to comply with new provisions, such as the right to a written statement detailing employment particulars.

The parameters of business models, and the inherent amount of control, may reduce the level of choice available to the individual or the platform as to which category the former falls under.

As choice about employment status may be diminished under a new regime, the change could force companies into a strategic decision about whether to amend their business model to take better advantage of the new delineation between workers and the self-employed. This will depend in part on what constitutes control, and there may be business imperatives that make any change impossible.

However, it is worth noting that the government has not accepted the recommendation made by the Taylor Review that the burden of proof during employment tribunal hearings should be moved from the employee to the employer but may reconsider once an online tool that will determine employment status has been developed.

What happens next?

  • There are now four consultations open for submissions, which are: consultation on agency workers (deadline 9 May 2018); consultation on enforcement of employment rights (deadline 16 May 2018); consultation on measures to increase transparency (deadline 23 May 2018); and consultation on employment status (deadline 1 June 2018).
  • Once these consultations have closed, government has three months within which it must publish a summary of responses. In this document, government gives an indication of how it intends to proceed. If primary legislation is required, government will need to find space in a parliamentary timetable that is increasingly constrained by Brexit.
  • The Government states that if it does decide “to press ahead with significant changes, we would of course ensure that businesses and individuals are given plenty of time to adjust and prepare”.

How will politics influence the next steps?

In the context of the difficult and divisive Brexit discussions, and in the face of Labour’s opposition, Prime Minster Theresa May and fellow Conservative MPs will want to use this agenda for positive headlines in the press while reinforcing an image of a ‘caring’ Government. The imperative will be to avoid unhelpful polarisation, hence the explicit decision not to revisit the National Insurance contribution paid by the self-employed.

Rachel Reeves MP, Chair of the Department for Business, Energy and Industrial Strategy Committee, which has been heavily involved in scrutinising the gig economy, criticised the focus on consultation stating that “there is very little from the Government’s response that will do anything to genuinely help the bogus self-employed”.

While the focus and emphasis on “good work” will be welcomed on all sides, it also invites further politicisation of the debate as there is no common understanding of how it should be defined. As a result, wider questions of fairness and decency in the labour market could well be dragged into this reform agenda.

What to look out for in the next few months?

  • Political responses to the proposals and whether stakeholders, the Labour Party and Trade Unions in particular, will push the Government to go further than currently outlined.
  • Continued discussion about definition of workers’ employment status, stemming not only from the Government’s announcement, but also the upcoming Workers (Definition and Rights) Bill (a Private Members’ Bill), presented by Chris Stephens MP. The Bill seeks to amend definitions of employment status and make provisions about workers’ rights when it has its next reading on the 27 April 2018.
  • Whether criteria additional to the original three used to decide employment status (mutuality of obligation, personal service and control) will be added. The consultation provisionally proposes factors such as financial risk, necessity to the business, provision of equipment and intention but encourages respondents to consider any additions.
  • The outcome of the various employment status court cases.

Talk to us to engage and influence the debate

Inline Policy help innovative businesses understand and navigate regulation, engage with decision makers in London and Brussels to influence policy, and provide strategic advice to on how to shape the debates that impact your future.

Our work on the gig economy is led by Hermione Thompson, who would be delighted to discuss these issues further with you. She can be reached on hermione.thompson@inlinepolicy.com.