What us contractor experts told Labour Market Enforcement Director Margaret Beels

On Tuesday May 17th, face-to-face with the Director for Labour Market Enforcement (DLME), Margaret Beels, I co-hosted a roundtable with some of the UK’s leading experts on labour markets.

It was a broad-ranging discussion on the reality of today’s and tomorrow’s labour market, where of course contractors continue to operate albeit with additional challenges, writes Keith Rosser, a director of group risk and Reed Screening.

To meet these challenges effectively, we need a new approach to regulation.

Our future labour market

The current backdrop is one of record vacancies and increased hybrid working. But what do these trends mean for the UK labour market?

Suggesting that the answer is not completely clear to everyone, Number 10 on Tuesday May 12th announced a ‘Future of Work Review,’ to be led by Matt Warman MP. The review is designed to guide long-term, strategic policy-making on the world of work.

Challenges to recruit staff have already created dangers for overseas workers enticed to the UK for work, only to end up in debt bondage. Will the introduction of remote right to work checks (with the effect of making virtual recruitment the norm), see a rise in work anywhere? So the beginnings of working in the Metaverse and a redefining of the importance of local jobs, potentially? And similarly, could this trigger a UK worker exodus to warmer, cheaper climates while these workers continue to service UK firms? Perhaps Iberian digital nomad villages might open up to contractors, as part of this offshore expansion of UK freelancers?

Offshoring (continued), and more 'P&Os'?

Less positively in the eyes of some, there is also the prospect that UK firms may offshore jobs in greater numbers, due to the difficulty of finding and hiring staff in the UK and the rising costs of employment.

And, as more than one delegate at the roundtable hinted, might the rising costs of living and employment create more ‘P&O’ examples? Firms themselves could go off-shore. But whether it would trouble UK contractors is less clearcut. After all, digital platforms are already helping to link contractors to ‘gigs,’ allowing them to operate anywhere outside the UK and, potentially, bypass UK regulations. So for contractors, the rise of digital and hybrid working indicates greater opportunity – and opportunities they are naturally predisposed towards, but also greater competition from a global marketplace.

A kaleidoscope of issues

The UK has an incomplete regulatory picture regarding employment. If we were designing labour market regulation from scratch, I doubt what we currently have in place would be the output of such an exercise! Even the proposed Single Enforcement Body is simply a bringing together of the existing regulatory position. At the roundtable, Ms Beels herself called for “joined-up” thinking.

Elsewhere at the meeting, it was correctly observed that the UK labour market is a “kaleidoscope” of issues, requiring an equally diverse and colourful range of solutions.

Almost highest up on the agenda of us delegates was the umbrella market. Not just the need for regulation due to the absence in the Queen’s Speech of an Employment Bill, but because of the continued creation of new schemes and models targeting contractors.

Not far behind, IR35 took a leading role in discussions. But the off-payroll rules commanded about the same coverage as immigration changes, labour shortages, offshoring, worker experience, digitisation, and recruitment fraud.

What kind of labour market do we want?

Key to understanding what sort of regulatory system(s) the UK needs, is the question -- what do we want from our labour market?

Assuming we want a fairer, flexible labour market that embraces innovation, but at the same time improves protections for workers, then regulation needs to support those goals. Current regulation simply cannot keep pace with change.

There is also a second problem, and that is how regulation can be enforced. Poor enforcement allows bad practices to fester, while creating a competitive disadvantage for compliant business models. This results in an unlevel playing field and uneven protection for workers.

Perhaps we therefore need to start from the idea of a responsible labour market; an ecosystem where responsibility flows from the hirer -- throughout the supply chain. But how do we build responsibility into the labour market?

The need for co-regulation

There was general consensus at the roundtable that industry must do more, and this came from industry captains themselves. Government cannot tackle this issue alone. This is why a cornerstone of a recent briefing of mine to ministers focused on the benefits of creating a ‘co-regulatory’ framework for the UK labour market. It would combine robust self-regulatory schemes that are jointly formulated by industry and government, with binding legislative duties. No more voluntary clubs.

Today, less effectively, we largely rely on enforcement agencies to stop bad actors. I believe the future of work in the UK requires that responsibility to be shared more broadly with industry -- where an incentive is created for businesses to adhere to standards because those that do become the preferred choice of hirers and workers.

We can leverage the current climate too. The labour market is transforming, impacted as it has been by Brexit, covid-19 and global events. As the world increasingly adopts hybrid working, a plethora of new online platforms, business models, and even employment models have arisen. This sense of change; of being at a crossroads, is conducive to making the reforms that Ms Beels has been charged with introducing.

Lastly, my message…

My final message to the DLME, if she’s hopefully reading this, and as almost a supplement to what I told her directly, is that the Fourth Industrial Revolution requires the UK to be agile. Chiefly, we need this agility in response to the changing global marketplace, so we can put the needs of workers at the core of that responsibility placed on intermediaries and agents – a responsibility shared by industry and government, to protect individuals in the digital economy, today and tomorrow.