Employment Rights Overhaul: What You Need to Know

Employment Status
The Government says it intends to take forward almost all of last year’s Taylor Review recommendations but it wants to consult businesses on the best way to do this. It wants to make it easier for individuals and businesses to understand if someone is an employee, worker or self-employed and what rights and tax obligations apply to them. The questions for consultees broadly boil down to:

  • Can there be a single test to determine employment status?
  • Should the existing three categories of employee, worker and self-employed be retained?
  • What factors should be used to determine each category?
  • Should employment and tax rules be aligned?

The Government is stressing that if it introduces major changes, it will give businesses ‘plenty of time to adjust and prepare’.

We set out below the other main changes (some firm, some less firm) that have been mooted by the Government.

10 Other Key Proposals

The Government is proposing to:

  1. Require all employers to issue a statement of particulars by day one of employment (rather than within 2 months); to issue this statement to all workers, including contractors; and possibly to update the mandatory content.
  2. Extend the right to an itemised payslip to all workers.
  3. Increase the reference period for holiday pay from 12 to 52 weeks, so seasonal peaks and troughs don’t distort the amount received.
  4. Make it easier for casual workers to obtain the 2 years’ service they need to claim unfair dismissal (currently, a 1-week gap between engagements breaks continuity).
  5. Give zero-hours, agency and other workers a right to request a more predictable contract (though it’s not clear how this would work).
  6. Stamp out unpaid internships.
  7. Ask the Low Pay Commission to consider increasing the minimum wage for zero-hours workers.
  8. Give HMRC the power to enforce holiday and sick pay rights to improve compliance.
  9. ‘Name and shame’ employers who don’t pay employment tribunal awards.
  10. Remove the ‘Swedish derogation’, which allows employment agencies that employ agency workers directly, to pay them less than the hiring organisation’s employees.

What Isn’t Happening?
This will sound like a lot of changes (and these are only the main ones). However, buried on page 58 of the Government’s response to the Taylor Review is some welcome news: the Government
has decided not to proceed with a proposal to legislate on restrictive covenants. These are the clauses in employment contracts that allow you to stop a former employee from competing with you for a limited period after they leave the business.

The Government has accepted the current approach works well and ‘restrictive covenants are a valuable tool’. The Government has also rejected Matthew Taylor’s controversial proposal to increase National Insurance contributions for self-employed people to bring them into line with employees.

What You Should Do
Change in most areas isn’t imminent and the consultation process may well lead to some of the more striking proposals being watered down. However, there are a few things you can do to start to prepare for the reforms:

1. If you offer unpaid internships, stop doing so immediately – unless someone is a genuine volunteer, the Government says they are entitled to receive at least the minimum wage. The Government has already been issuing hundreds of warning letters to employers and has asked HMRC, which enforces the minimum wage, to crack down on what it says is an ‘exploitative’ practice.

2. If you’re a traditional business with all your employees on the payroll, the main change to look out for is the requirement to issue a (possibly beefed-up) ‘day one’ statement of particulars. In the meantime, you could consider making your existing processes more efficient so new recruits receive information about their rights as soon as they start work.

3. If you rely heavily on self-employed, zero-hours, casual or agency workers, familiarise yourself with the proposals. If you think they will impose an excessive burden on your business, tell the Government before it’s too late. The various consultations end in May and June.

4. If you use self-employed contractors, be aware that, even though the law on employment status hasn’t been clarified yet, individuals can still bring claims if they think you’ve got their status wrong. If you’re at significant risk of high-value claims – for example, for unpaid holiday – it may be better to bring these individuals onto your payroll now rather than sitting back and waiting for the new legislation. Alternatively, consider setting aside a fund so that, in the worst-case scenario, you can fight or settle any claims.

 

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