Employment status and the gig economy were rarely out of the headlines in 2018 and this theme seems set to continue in 2019 and beyond.
Contractors vs Casual Workers - Employment Rights
This month has seen a further decision of the employment tribunal confirming that “freelance” lecturers for the National Gallery were workers with limited employment rights rather than self-employed contractors The development of the case law relating to employment status and the Government’s proposals for reform targeted at improving conditions for atypical workers, means that it is more important than ever before for HR professionals to get to grips with the potential risks in this area, especially if the business currently engages contractors and casual workers.
Categorising Employment Status
Recent cases concerning employment status have clearly demonstrated that the manner in which the business and the individual categorise their relationship is increasingly irrelevant. It is becoming increasingly difficult to demonstrate that an individual is genuinely self-employed.
When determining employment status, tribunals focus on the reality of the situation in practice. Whilst a range of factors are relevant to the employment status of individuals, many recent cases focus on personal service. If an individual is obliged to provide services personally, a finding that the individual is a worker is more likely than not. This principle has been confirmed in several recent cases including the much-publicised litigation involving Uber and Pimlico Plumbers.
Where a business is engaging contractors in circumstances where they are required to provide service personally, thought should be given as to whether the arrangements are sustainable.
The Government has also recognised the issues relating to employment status. In November 2016, the Government launched the Independent Review of Employment Practices in the Modern Economy to consider the implications of new models of working for the rights and responsibilities of companies and individuals.
Modern Working Practises
Matthew Taylor’s report, Good Work: the Taylor Review of Modern Working Practices was published in July 2017 and made 53 recommendations. Matthew Taylor was particularly concerned that businesses should not be able to avoid responsibilities to individuals by trying to misclassify or mislead their staff. Many of the recommendations in his report are aimed at addressing this issue.
The Good Work Plan was published on 17 December 2018 and includes the Government’s intention to implement the majority of Matthew Taylor’s proposals. The proposals which are likely to be of interest to most HR professionals include:
• Clarification of employment status - The Government agrees with Matthew Taylor’s concerns regarding the misclassification of staff and says it will “bring forward detailed proposals” on how the employment status frameworks for tax and employment rights should be aligned. There will also be legislation to “improve the clarity of the employment status tests”.
• Holiday Pay - The Government has launched a campaign to boost awareness of holiday rights and from April 2020 the reference period for calculating holiday pay will increase from 12 weeks to 52 weeks. This ensures that workers who do not have a regular working pattern are not disadvantaged by having to take their holiday at a quiet time of the year when their weekly pay might be lower.
• A new right for workers to request a more predictable and stable contract will be introduced. This is intended to address the issue of “one-sided flexibility”. It is anticipated that this will work in a similar way to the current rules on flexible working.
• The “Swedish derogation” in the Agency Workers Regulations 2010 currently allows temporary work agencies to avoid the “equal treatment” provisions of the AWR by engaging agency workers in a way that allows for pay between assignments. This will be abolished.
• All employees and workers will be entitled to a statement of terms and conditions from day one.
Off Payroll Working Rules
In addition, the current rules relating to “off payroll working” which apply in the public sector will be extended to large and medium-sized businesses in the private sector from April 2020. Essentially this means where the IR35 rules apply, the fee payer rather than the intermediary will be responsible for deducting income tax and employee NICs from, and accounting for employer NICs on, broadly, the fees it pays to the intermediary.
Whilst none of the proposals set out in the Good Work Plan are likely to come into force before April 2020, it is clear that the law relating to atypical working relationships will be subject to significant change in the coming months and years. Employers need to consider how to address these changes in good time taking into account the current approach to employment status being taken at the current time by the employment tribunal.
Taylor Walton are currently running free workshops to assist HR professionals when considering commercial risks relating to the status of their staff. If you would like to attend these workshops please contact firstname.lastname@example.org or call 01582 390568.
Should you have any questions on the topic, then please feel free to contact Nicola Smyrl (email@example.com). Alternatively, you can call our Employment team on 01582 731161.