Taylor Review analyses Britain’s changing employment landscape


Written by: Lee Hamilton

The publication on 11 July 2017 of the Taylor Review of Modern Working Practices (The Taylor Report) is likely to be the precursor to wide ranging changes in the employment landscape across the UK.

It will be of particular interest to all employers who require a flexible workforce (especially those in the ‘gig economy’), as well as those people who don’t have traditional employment arrangements.

Taylor has the ambitious and commendable aim of “good work for all” and has challenged policy makers and legislators to tackle exploitation, increase clarity in employment and tax law and better incentivise businesses to ‘do the right thing’ when it comes to working practices.

The report provides a concise analysis of Britain’s changing employment landscape, citing the increase in self-employment, the rise of the ‘gig economy, the advent of ‘zero hours contracts’, alongside a range of other factors which mean that the current legislative and regulatory environment requires an overhaul.

Taylor’s report covers a number of key areas, including the quality of work that people do, promoting responsible business, incentivising good employer practices, implementing fairer enforcement of employment laws and regulations and also developing a clearer employment and tax law framework.

Although the proposed changes do offer the building blocks for substantial change and are likely to lead to increased costs for some businesses, especially in the ‘gig economy’, Taylor does recognise that it is important that any changes should build on and promote the strengths of the UK economy, including the capacity for successful employment creation and labour market flexibility.

Lee Hamilton, Partner, commented: “It is very encouraging for businesses and workers alike that Taylor has put forward proposals that aim to build on the strengths of the UK economy, such as the flexible labour market, successful job creation and a sensible level of regulation. It would be wrong in my view to heed the calls of some who want to move towards a more heavily regulated environment which risks damaging the UK’s capacity for job creation and the economic growth that this brings”.

For many years, employment status (i.e. whether someone is employed, self-employed or a worker) has become an increasingly contentious area, with employment status being based largely on case law and with many disputes being referred to the courts to settle. As part of his recommendations, Taylor has proposed greater clarity when it comes to an individual’s status, with ‘workers’ (a category which falls between employment and self-employment) being renamed “dependent contractors” and with the three types of employment status (employed, self-employed and dependent contractor) being clearly defined in primary legislation. Furthermore, Taylor has recommended that the burden of proof in hearings on ‘status’ should be placed on the employer (i.e. rather than the worker having to prove that they are employed).

The same lack of clarity in the employment regulations is apparent when it comes to employment status for tax purposes. Although the reports remit did not specifically include taxation, Taylor has recommended that the taxation of labour should be more consistent across the employment forms, whilst increasing the rights of self-employed people.

The central premise here is that it is unfair for different arrangements (e.g. self-employment, employment, engagement via personal service companies etc.) to produce different tax and National Insurance outcomes for individuals who are essentially doing the same work. If enacted, such changes are likely mean a reduction income for self-employed workers, given the drive to achieve parity between the rates of National Insurance Contributions for employed and self-employed earners and also aligning the categories used in tax regulation and employments regulation.

The report also proposed better definitions around the tax boundaries (i.e. when should someone be treated as an employed or self-employed for tax purposes).

Mark Abbs, Partner, goes on to comment: “Clarity is welcome as the subjective rules are far too complex as they are, but it is paramount that any change should be made simple and clear. From experience, new legislation is usually too complex and over engineered. Above all else, what is key is that we do not stifle the highly prized entrepreneurial spirit we have in the UK, and which should be nurtured not harmed.”

The report makes a series of other recommendations, including applying a 20% premium to the national minimum wage for workers carrying out piece rate work, a possible higher minimum wage for ’zero hours contract’ workers and the enforcement by HMRC of rights relating to sick pay and holiday pay. An HMRC consultation on the tax aspects of the report is expected later in the summer.

A full copy of the report can be found here.

For more information please contact Lee Hamilton.