Payroll insight
them – most basically, deciding whether the individual is an ‘employee’, a ‘worker’ or genuinely self-employed. For a number of reasons, this is becoming more complex for an increasing proportion of the workforce and an issue which faces payroll professionals on a regular basis. The report acknowledges the confusion that exists between the two categories who are eligible for ‘worker’ rights, suggesting that it should be made easier to distinguish each. The review’s suggested solution to this problem – and which has attracted a great deal of media scrutiny since publication – is the introduction of a new name for those categorised as workers but who are not employees – ‘dependent contractors’. The report acknowledges that getting this right is not only about protecting individuals. Businesses too want to ensure they are operating on a level playing field when complying with their legal responsibilities and not being undercut by less responsible employers. In a statement few could disagree with, the report concluded that the government should take a fresh look at the legislation to introduce clarity for both employers and individuals so that everyone can understand what employment status applies and what rights an individual is entitled to. ● Aligning employment status and tax status – Many reading this will agree with the review’s finding that the lack of alignment between a worker and the self-employed in employment law, and employed and self-employed in tax law, is a source of confusion for organisations, individuals and the wider public. And whilst there are reasons why employment status and tax status legislation are not currently aligned, the Taylor review is hopeful that the suggested approach will help to bring these two systems closer together and create clearer boundaries. In simple terms, the report suggests that when designing a new tool for determining status, the dividing line should be between the new dependent contractor status or self-employment so that being employed for tax purposes naturally means an individual is either an employee or a dependent contractor. And whilst self-employment is not an employment status, the government should aim for ‘self-employed’ to mean the same for both employment rights and tax purposes.
● Modern working – Perhaps the area of this review which attracted most media attention is the concern that flexibility of the workforce only benefits business and not the individual. Issues considered by the review include zero-hours contracts; holiday pay calculations; and equal tax treatment for different forms of employment. ❍ Zero-hours contracts – Being able to work when you want is a good thing; not knowing whether you have work from one day to the next when you have bills to pay is not.
a general rule, annual leave entitlement equates to 12.07% of hours worked. We believe individuals should have the choice to be paid for this entitlement in real time – known as ‘rolled-up’ holiday pay. This would result in dependent contractors receiving a 12.07% premium on their pay. So, in the case of someone being paid the national living wage of £7.50, their actual remuneration would be £8.41 an hour. Additional safeguards would have to be built in to ensure individuals did not simply work 52 weeks a year as a result, but the report authors believe that giving individuals this kind of choice will suit many working in casual arrangements and in the on-demand economy. ❍ Equal tax treatment for different forms of employment – Whilst specific tax changes were outside the remit of the review, the report authors concluded that treating different forms of employment more equally in the tax system would be fairer, more economically efficient and support better quality work. It would also reflect the reality of the modern UK labour market. Currently, the different rates of National Insurance contributions (NICs) mean that the UK system of taxing labour is not neutral – a self-employed person doing the same work as an employed person can pay a different amount of tax or NICs despite receiving similar contributory benefit entitlements. The review considers that this situation is not justified or sustainable, nor is it conducive to the goal of a good work economy. Controversially perhaps, the Taylor review says that the principles underlying the proposed NICs reforms in the 2017 spring budget are correct. The level of NICs paid by employees and self- employed people should be moved closer to parity and the government should also address those remaining areas of entitlement – parental leave, in particular – where self-employed people lose out. n Though this summary only gives a flavour of the recommendations made, it is fair to say that even implementing only those recommendations mentioned here would bring about significant change to the modern workforce. Whether the government has the appetite to adopt all the recommendations remains to be seen, but the CIPP will keep you informed of developments as they emerge.
...individuals should have greater choice in the way they
receive paid annual leave
The Taylor review suggests that the government must take steps to ensure flexibility does not benefit the employer, at the unreasonable expense of the worker, and that it is genuinely a mutually beneficial arrangement. It recommends that the government should ask the Low Pay Commission in its next remit to advise on the impact of bringing in a higher NMW for hours which are not guaranteed in a contract. This new higher rate should be set at a level which incentivises employers to schedule guaranteed hours as far as reasonable within their business. Businesses would still have ability to offer zero- or short-hours contracts, or to request that an individual works longer hours than those guaranteed in their contract, but would have to compensate the most vulnerable workers (those on low wages) for the additional flexibility demanded of them. ❍ Holiday pay calculations – A bone of contention amongst payroll practitioners for many years, this review addresses some, though not nearly all, of the issues we have long campaigned on. Firstly, the review recommends that the pay reference period for calculating holiday pay should be increased to 52 weeks to take into account the seasonal nature of a great deal of casual and zero-hours work. The report also recommends that individuals should have greater choice in the way they receive paid annual leave. As
23
| Professional in Payroll, Pensions and Reward |
Issue 33 | September 2017
Made with FlippingBook HTML5