Policy News Journal - 2017-18

time in their work schedule to take the leave, however for those who work in more casual arrangements, or have variable hours from week to week, knowing how much they are entitled to be paid for annual leave can be difficult.

The legislation provides a solution. The holiday entitlement of a worker without normal working hours is based on the amount of hours worked over a pay reference period of 12 weeks. However, it is widely acknowledged that this does not work for everyone, especially where work is seasonal or there are significant peaks and troughs in work. For example, an individual may work 50 hours a week during the summer months and then scale back their hours for a month to just 10 hours a week before taking leave. In this situation, the individual would not necessarily get all the holiday pay to which they should have been entitled. In addition, it was suggested to the Review team that some workers - especially true in the case of lower skilled, lower paid agency workers and those on zero hours contracts - either did not know they were entitled to paid annual leave or were afraid to take it. While this may simply be a matter of awareness, bad employers can use this to their advantage. Having a large workforce of people on zero hours contracts who do not take all their annual leave can be worth a significant amount of money to a business. The Report recommends that government should intensify their efforts in communicating who is entitled to holiday pay in the same way as they provide clear messaging every year on the NMW and NLW rates. However, the Review team believe the government can go further and in the first instance, the pay reference period should be extended to 52 weeks to take into account the seasonal nature of a great deal of casual and zero hours work. Individuals should also have greater choice in the way in which they receive paid annual leave. As a general rule, annual leave entitlement equates to 12.07% of hours worked. Individuals should have the choice to be paid for this entitlement in real time – known as “rolled-up” holiday pay which would result in ‘dependent contractors’ receiving a 12.07% premium on their pay. So in the case of someone being paid the NLW 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 Review team believe giving individuals this kind of choice will suit many working in casual arrangements and in the on-demand economy.

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Equal tax treatment for different forms of employment 2 August 2017

The Taylor report ‘ Good Work ’ concluded that treating different forms of employment more equally in the tax system would be fairer, more economically efficient and support better quality work.

The world of work is experiencing the biggest structural change since the current system of taxation was introduced. The Taylor report says this means that now is the right time to properly consider whether the way in which employment is taxed achieves what it is designed to. Employment rights Some argue that the rate or level of National Insurance contributions that someone pays should be related not just to the benefits they receive from the government but also to the rights provided by their employer. The rights that an employee gets are paid for by their employer; they form part of their overall remuneration. A self- employed person can set their own prices and keep all of their profits; from this they can choose how much to take home and how much to put into a pension or set aside for holiday pay. However, part of an employee’s salary usually has to be received in the form of a pension and holiday pay. An employed person’s total remuneration is therefore rarely their headline salary: an employer paying someone a headline salary of £25,000 could actually pay that person at least £30,000 once other parts of their salary – such as mandatory holiday pay and pension contributions – are taken into account. This is partly to reflect the mutual relationship between an employee and employer: an employee has certain rights and benefits but also obligations to turn up to work and to carry out tasks as directed by their employer. A genuine self-employed person is their own employer; they work on their own terms and provide themselves with their own pension and holiday pay. The costs associated with providing these benefits will usually be recovered through the amount that they charge. This means that for a business engaging labour, the cost of labour (whether employed or self-employed) should be neutral: they will have to meet an employed person’s costs (including wages, holiday pay and pension contributions) directly and a self-employed person’s costs by paying a higher fee for their services.

The Chartered Institute of Payroll Professionals

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