The Taylor Review: What does it mean for my business

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The long awaited Taylor Review of Modern Working Practices was published earlier this month, aiming to bring clarity over the employment status framework for businesses and workers. Tackling an issue high on the political agenda, the fallout from the Government-commissioned Review could soon have a significant impact on your business practices.

Why was the Review launched?

Commissioned in October 2016 by PM Theresa May and headed by former political strategist Matthew Taylor, the Taylor Review sought to examine the UK labour market. Although the remit was to cover the market as a whole, it was largely prompted by exploitation of perceived vulnerable workers within the gig-economy. 

Certain companies hiring workers on contracts of self-employment have been doing so both to avoid paying Employer’s National Insurance (NI) and to avoid honouring the employment rights of these workers. In reality the nature of the relationship in many cases has been that of employee and employer.  
In October 2016 two Uber drivers defeated the technology company in an employment tribunal, entitling them to certain employment rights including paid holiday and sick leave. This has led to further litigation of similar claims from workers who believe they are being denied employment rights.The Review’s recommendations don’t only impinge on exploitative employers. If you hire anybody on a flexible basis, you could experience significant changes to your employment practices.

What are the recommendations?

Most notably for hirers, the Taylor Review emphasises the need to provide a fair balance of rights and protections across forms of employment. Eventually offering certain employment benefits to workers hired on a flexible basis could become standard.

At the same time, whilst he doesn’t outline any detailed plans as to how to do so, Taylor also stresses the need to increase the tax collected from the self-employed, which is far short of the tax take from employment.

If the recommendations are enacted, it would effectively mean hiring someone on a self-employed basis would more closely resemble employing them, ramping up costs for businesses. Whilst this might help protect gig-economy workers, its impact on the genuinely self-employed would surely be counter-intuitive.

The key question is how do you know when a worker qualifies for protections, and what protections should they be? Taylor suggests introducing a category of ‘dependent contractor’, a new name to help distinguish those who are eligible for worker rights but are not employees. He claims this can help bring greater clarity for all parties involved.

 

The Review stresses that for these goals to be achieved, responsible corporate governance and good management are required within organisations, with Taylor calling on companies to be open about their employment practices.

How might the Taylor Review impact my business?

The recommendations are very much in their infancy, and it could be a while until any are legislated, if they are at all. However, it’s already apparent that they could affect your business in a number of ways. 

The success of the recommendations hinges on the idea that companies will provide clarity and transparency over working practices. Firmer definitions of employment status will help you determine which employment category an individual falls into, and what employment rights and protections they may be eligible for. On the flip side, it could also mean that your business is more likely to be caught if your practices aren’t compliant with future rules.

There is also the cost of these provisions to factor in. Benefits that look likely to be afforded to ‘dependent contractors’, including paid leave, come at a cost to the hirer. You’ll want to make sure that your engagement of workers on a flexible basis is still cost-effective, without being exploitative. Is the price you pay for flexibility worth it?

By highlighting the Government’s intention to reduce the gap in terms of tax take from the employed and self-employed, the Review could signal a migration away from flexible working in the long-term.

For example, many contractors forego employment rights and job security in exchange for flexibility and the opportunity to take advantage of legitimate tax planning strategies. If protections are introduced to the self-employed and taxes increase, many may seek full employment in turn. For companies the inevitable outcome is reduced flexibility.

For more information, or to read the Review in full, click here.

This ​article is written for general interest only and is not a substitute for consulting the relevant legislation or taking professional advice. The authors and the firm cannot accept any responsibility for loss arising from any person acting or refraining from acting on the basis of the material included herein.