It has taken the government four years to publish 'Employment status consultation: government response', it was barely worth the wait. To date, a large number of the recommendations of the 2017 Taylor Review of Working Practice have been ignored.
The Taylor Review of Modern Working Practices was published in July 2017 and considered three themes:
- Tackling exploitative employment practices.
- Increasing clarity in the law and helping people enforce their rights.
- Aligning the incentives driving labour market change with broader national objectives.
It contained a wide range of recommendations on issues such as agency workers, the need to legislate to reform employment status, the enforcement of employment rights, maternity discrimination and zero-hours contracts.
Following the Taylor Review in 2018, the government published its response in its 'Good work plan' and many of the recommendations were to be dealt with by an Employment Bill. A Consultation on Employment Status also looked at tax and employment rights noting that:
- The question of Employment Status is not clearly set out in legislation, relying instead on case law.
- Where there is a dispute, it is the responsibility of different employment tribunals and tax tribunals to determine status for the purpose of employment rights (a point well illustrated by the employment status drama of the Uber drivers, who required the Supreme Court to determine their legal status and had the knock-on effect of a tax enquiry).
- Employment status is a complex issue requiring individuals and businesses to interpret and apply tests from several case law precedents and an individual’s employment status can be inconsistent between employment rights and tax.
- HMRC enforcement of employment status for tax purposes can be costly and time-consuming for both HMRC and the businesses involved due to the fact-specific nature of the tests.
The Consultation considered recommendations to reform the rights of three types of workers in law:
- Employee.
- Self-employed.
- A ‘Limb (b)’ worker.
Key themes in the Consultation were as to whether workers' employment rights should match their tax rights and, whether there should be an overhaul of the legislation to create a statutory employment test (i.e. as happened in the creation of a statutory residence test).
Disappointingly for many individual workers and their advisers, the government considers that the benefits of creating a new framework for employment status are "currently outweighed by the potential disruption associated with legislative reform". Although it admits that "such reform could help bring clarity in the long term", the excuse is that "it might create cost and uncertainty for businesses in the short term, at a time where they are focusing on recovering from the pandemic".
In short, this topic is apparently too difficult for the government to cope with and having different types of workers creates 'flexibility' in the labour market. It is a point that might not be taken so well by those suffering under zero-hour contracts.
The four-year delay in publishing the response appears to be due to a change in the prime minister and the disruption of the COVID-19 lockdown.
As "now is not the right time to overhaul the employment status frameworks for rights and for tax", the government thinks that it can improve things for individuals and employers by publishing guidance for status and working time for minimum wage purposes.
As a footnote, the government also dropped its Employment Bill. This was omitted from the 2022 Queen's Speech and as a result, many of the recommendations of the Taylor Review appear to have now been 'kicked into the long grass'.
Useful guides on this topic
Starting in business: start here
Starting a new job or starting in business? Our 'At a glance' guide takes you through the key steps in getting started for tax, with links helping you drill down for more detail.
Response to Taylor review of Modern Working practices
Government's response to the 2017 review.
Employment status checklist
Employment basics for employers and employees.
Employment status (subscribers)
A review of case law covering employment status, together with a detailed checklist, based on case law. Ideal if you are creating a new business in the 'gig economy'.
Check Employment Status for Tax (CEST)
A review of HMRC's CEST tool.
Personal Service Company (PSC) tax
Running your own business and selling your personal services as a worker? Start here.
Agency Workers: employment intermediaries rules (subscribers)
Working for an agency? Running an agency? Who has to operate PAYE within the labour supply chain?
External links
Employment Status consultation: government response
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