Taylor Review unveils ‘contractor-centric’ proposals
A ‘contractor-centric’ set of recommendations has been put forward in the Taylor Review.
The nine-month probe into the ‘gig economy’ and other forms of “atypical” modern work comes close to achieving the clarity around self-employment that a contracting body wanted.
In particular, the review says the government must make legislation “clearer”; employment statuses “distinct” and “not open to as much interpretation… nor be so ambiguous.”
No definition of self-employment
Although this recommendation stops short of defining self-employment, as contracting body IPSE said it wanted, the review does say that the statute book should change.
“Government should replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation”, it says.
But there is no mention of giving sick pay to freelancers or other genuinely self-employed traders, despite a poll showing they would value this employee-style perk above all others.
Another call made to the review’s head Matthew Taylor before his conclusions yesterday was to extend the National Minimum Wage (NMW) to other flexible workers, notably those doings ‘gigs.’
Yet this too was rejected by Mr Taylor, head of the Royal Society of Arts, even though he wants two-way flexibility on pay, whereby he wants ‘gigging’ during busy periods of high demand to command at least the NMW.
Placating unions though, which wanted a blanket extension of the NMW to all gig workers, the review says firms which control and supervise workers should pay benefits like National Insurance.
NI hike was 'correct'
And although it has now been reportedly ruled out by the government’s number two, Damien Green, the review says “the principles underlying” Budget 2017’s proposed NI hike are “correct.”
But any eventual move to bring parity between employed and self-employed NI, should also address entitlement areas where the self-employed “lose out”, such as parental leave.
With similar goals in mind (to be fair both to engagers and workers but also the exchequer), Taylor’s most radical recommendation is for a new employment status category to be created.
In fact, the term ‘dependent contractor’ should be given to people who are eligible for ‘worker’ rights but who are not employees, nor genuinely self-employed.
The review explains of its recommendation: “In developing the test for the new ‘dependent contractor’ status, control should be of greater importance, with less emphasis placed on the requirement to perform work personally.”
This new category would not require a significant change in terms of how courts interpret status when it comes to control, Taylor assures, but it would protect more of the unprotected.
“Placing greater emphasis on control and less emphasis on personal service will result in more people being protected by employment law,” says the review.
“It will also make it harder for some employers to hide behind substitution clauses which can only be challenged effectively through the courts.”
Do not disturb status quo
Positively for existing freelance professionals not wanting any change to their set-up, the review says the creation of ‘dependent contractor’ status must not disturb “those for whom the current system works”.
Where in future there is doubt however, a free-to-use online tool should go live to help engagers with status advice, and give individuals an “indication” of their status.
It’s a premature proposal for Andy Vessey, head of tax at Qdos Contractor. He said: “Given that HMRC’s existing ESS Tool has delivered unreliable and in many cases contradictory results for public sector contractors since its release, we’re sceptical of another tool being discussed so soon.”
As to the timetable to potentially put the recommendations in the review in place, the RSA boss initially leans towards ‘sooner rather than later.’ He talks of “specific measures we would like to see enacted as soon as possible.”
Later however, and after his recognition that there needs to be “longer term strategic shifts,” he suggests that any impact on individuals will not be immediate.
“In reality, this is a complicated task and work cannot begin until the legal framework is finalised,” the review says. “It is also going to be an iterative process and would benefit from starting with something manageable.”
'Not specific enough'
Crawford Temple, of freelance work compliance specialist Professional Passport said: “The report has many high-level recommendations, but they are just not specific enough.
“It is therefore difficult to put any value or meaning around them. Once again the issue of tax has been side-stepped and this will be a critical element in the mix of tax versus rights.”
Despite the criticism, the review does recommend aligning tax and employment status -- a move it says would provide clearer boundaries, and reduce uncertainty for employers and individuals alike.
“Taylor’s recommendation to align tax and employment status would be a clearly positive step, as this is an issue that currently causes a great deal of confusion,” said IPSE’s Chris Bryce.
“[And] renaming workers ‘dependent contractors’ might bring some benefits, but government will have to be absolutely clear who falls into this group. It will still be up to the courts to rule on employment status.
“We also have a serious concern that it is far too reductive to only look at direction and control as indicators of worker -- or ‘dependent contractor’-- status. In reality, things are a lot more complicated than that.”
Supervision, Direction or Control?
The Association of Professional Staffing Companies reflected: “The fact that the ‘dependent contractors’ will be categorised according to whether individuals are under the supervision, direction, or control of the organisation they are working for suggests that employment status will be aligned, to some extent, with tax law”.
However tempering its optimism, the agency body said it was "cautious" about the idea that taxation should be consistent across "all" forms of employment.
For qualified solicitor Shaun Critchley, who also runs accountancy firm ADVANCE, the devil could be in the detail.
He said: “The suggestion of a new ‘dependent contractor’ category to replace ‘worker’ status is interesting and potentially beneficial but the area of employment status is notoriously complex, so the government will really need to get the detail right if and when it comes to legislate on this.”
Elsewhere in the Taylor Review, the government is recommended to
- re-examine what information needs to be provided to recruitment agency workers before they accept work
- intensify their efforts in communicating who is entitled to holiday pay, as they do every year with the NMW
- combat the billions lost via the ‘hidden economy’ by look at accrediting a range of platforms designed to support cashless (but transparent) transactions
- consider setting a higher NMW for people on 'zero-hours' contracts
Despite some of these potentially far-reaching changes being mooted, employment intermediary trade body PRISM is disappointed. “We needed radical,” it said, “-- we got timid.”
On behalf of company directors, the IoD is much more supportive.
“Matthew Taylor has got the balance right,” it said. “Bringing more clarity to the ambiguous definitions of employment status in the UK will reassure most employers, who often shy away from offering employee-style benefits to their self-employed contractors for fear of exposing themselves to legal challenges.”
Speaking yesterday, Stephen Martin, IoD’s director-general added: “Translating the headline proposals in today’s review into practice and legislation will now require a substantial combined effort from politicians, businesses, individuals, and trade unions. In that sense, suggestions that the proposals amount to just tinkering around the rules are off the mark.”