Payroll insight
on zero-hours contracts, holiday pay calculations, and equal tax treatment for different forms of employment. The report made recommendations which some regarded as being quite radical including the suggestion 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. Businesses would still be able 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. Equal tax treatment 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 (NIC) in particular mean that 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 in return. The review considered that this situation was not justified, or sustainable, nor would it be conducive to the goal of a good-work economy. Controversially perhaps, the Taylor review suggested that the principles underlying the proposed NICs reforms in the 2017 Spring Budget were correct. The level of NICs paid by both the employed and the self-employed 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. The government’s response So how has the government responded to these 53 recommendations? Well, in time-honoured fashion, it has issued four consultation documents – unsurprisingly, given the scale of the task, each one is very long and very detailed. l Employment status consultation –
Employment status is at the core of both employment law and the tax system, as it determines the rights that an individual gets, and the taxes that they and the business they work for must pay. But, as the review highlights, the current framework is complex and can often fail to provide the clarity and certainty that individuals and businesses need. This is increasingly the case for those who are working in new ways, including those working through digital platforms in the ‘gig economy’. ...placing the employment status tests developed The consultation looks in detail at how the options proposed by the review would work, both in legal terms and in relation to the realities of the modern labour market, as well as seeking to understand the potential impacts and implications of those proposals. Employment status is dependent on the interpretation and application of case law against the specific facts of each case, making it difficult for some individuals to predict their status. To address this, the consultation explores the possibility of placing the employment status tests developed by the courts into primary legislation. This consultation also considers the rules that determine who gets which rights, and who is subject to the rules that currently apply to employees and/or workers and who is subject to the (very limited) rules that currently apply to the self-employed. Also included in this consultation is the question of what constitutes working time for the purposes of NMW (and national living wage), specifically for those working via an online platform. l Increase transparency in the UK labour market – The review highlighted areas where individuals and businesses would benefit from greater transparency around contractual arrangements between employers and workers, and made recommendations aimed at achieving this. The government has accepted several of these recommendations in full and by the courts into primary legislation
is now consulting on the details prior to implementing them. This includes: the proposal to extend the right to a written statement to workers as well as employees; the recommendation that the government should do more to promote awareness of holiday pay entitlements; and, in a move that will delight payroll departments throughout the nation, increase the holiday pay reference period from 12 to 52 weeks. The consultation document focuses mostly on the recommendations which relate to transparency of information including the proposal to extend the relevant break in service for the calculation of the continuous service qualifying period, and also on proposals relating to the introduction of a right for workers to request a change in contract to improve predictability. l Agency workers – The recruitment sector has two main types of legally defined types of service: employment agencies, which introduce people to hirers to be employed by the hirer directly; and employment businesses (also known as temping agencies), which employ or engage people to work under the supervision of another person. Current legislation covers principles such as restrictions on fees, ensuring that temporary workers are paid for the work they have done, record-keeping, advertising, and ensuring that identity and suitability checks are carried out on work seekers. The regulations provide a framework for arrangements between agencies and employment business as well as the arrangements between hiring businesses which include contracts between work seekers and agencies / employment businesses. But there is increasing complexity in this area and it can sometimes be difficult for work seekers to understand who is ultimately responsible for paying them. The number of organisations involved in the chain can be quite lengthy, and it is not unusual for a work seeker’s money to pass through several different organisations before they receive payment. Though this is not illegal, unless deductions are being made in breach of legislation, it can be confusing. In response the government is proposing that any contract/terms of business between a work seeker and an employment business should contain a
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| Professional in Payroll, Pensions and Reward |
Issue 40 | May 2018
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