What are we talking about?
The Framework for Modern Employment.
As you know the government want to review modern working practices in the UK and ensure that workers are being treated fairly in the rise of the so-called gig economy.
Back in 2017 the government commissioned the Taylor Review to investigate real life practices. Following this The Work and Pensions Committee have put forward what they are calling “The Framework for Modern Employment”. This is basically a summary of proposed changes they would like to be introduced to create a fair working environment for all. It includes a draft bill that is due to be put forward to parliament early in 2019.
So, what are these changes and what do they mean for the recruitment sector?
1 – Clearer Statutory Definitions of Employment Status
Employment status is never clear cut. The committee have put forward that we need greater clarity of employment status (we’d all agree we need that!). The False Self Employment legislation (introduced in 2014) resulted in many agencies side-stepping paying self-employed workers to avoid the question. But with the off payroll working rules being extended to the Private sector from April 2020 many agencies will be scratching their head again when it comes to deciding employment status. We look forward to getting more clarity on these changes over the coming months but agencies with Limited Company Contractors (PSCs) need to expect increased cost in managing the policy change as well as ongoing administration of additional checks to ensure they protect both themselves and their clients.
2 – Worker by Default
Currently the onus is on the individual to prove they’re a ‘worker’ (usually by taking the company to court). Instead the committee have suggested that it should be the company who has the burden to prove the worker is self-employed protecting vulnerable individuals who would now instead be assumed to be workers by default.
Agencies will need to review their decision-making process but also the records they retain as evidence for their decision making.
3 – Non-guaranteed Hours
The committee agrees that the non-guaranteed hours (you’re contracted to 25 hours per week but might work 40 hours after working 15 non-guaranteed hours) does offer flexibility to both workers and employers. However, there is concern that the benefit can often be weighted more to the employer.
The recommendation is to run a pilot scheme to try paying workers for non-contracted hours a pay premium on the National Minimum Wage. If such a pilot was successful, this could lead to complexity of payroll processing for workers on or near NMW. Its unclear at the moment how these changes would impact agency workers.
4 – Continuous Service
Certain employment rights are given to employees on a contract of employment (for example entitlement to one week’s notice of dismissal after one month’s service or the right to claim unfair dismissal after 2 years’ service). Continuous service is currently broken by any one week where the employee is not governed by a contract of employment. This could be simply when they are either not offered work or choose not to work. Casual workers can inadvertently restart the counter any week where they do not have a contract meaning they lose out on employment rights. The committee have suggested the break in service is extended for one week.
For agencies this will impact internal staff but also those temporary contractors employed by umbrella companies who are also under contracts of employment.
5 – Employment Tribunals
In the UK class actions are only permitted in consumer protection cases. This means that although a group of claimants can bring a case against their employer for example on disputed wages, status or even working time each individual in the group must still go through the full legal process and if the group wins the result only impacts those individuals in the group (there is no obligation for the employer to apply the result to all other workers). As a result, it is felt employers are more like to have a ‘wait and see’ mentality when it comes to court cases. The committee want to encourage larger fines to discourage employers from abusing legislation and to consider expanding the use of class actions.
6 – Flexibility and NMW
The Taylor Review acknowledged that a flexible labour force has benefits for both workers and business (plus us consumers too). But there is concern that workers are often burdened with all the risks of such flexibility. There is particular concern around so called platform workers – those workers obtaining work when they are available through platforms such as Uber or Deliveroo. Suggestions for improvement from the Taylor Review are based on the current NWM legislation where workers are paid piece rates (workers are based on their output but companies but demonstrate that the average worker is paid an equivalent hourly rate of at least 120% of NMW). From our experience calculating pay on piece rates, although common in some sectors such as farming, is a complicated way to pay workers based on the checks and evidence needed to ensure NMW compliance and could add increased admin burden to agencies.
7 – Entitlement to a written statement of employment particulars
In order to allow workers to better identify if they are being treated unfairly at work it has been suggested that all workers should be provided a statement of working conditions within 7 days of the start date. (Currently this is only available to employees and only within 2 months, although there is currently little enforcement). For good businesses it is expected that confirmation of assignment details are already provided to agency workers so if these changes do get implemented it wouldn’t cause too much hassle. A focus on these changes may change details requested for tendor agreements and allow compliant agencies an advantage to those not doing the right thing.
8 – Lowering the Information and Consultation of Employees (ICE) Threshold
The information and Consultation of Employees (ICE) Regulations 2004 offer workplaces with union representation a framework for consultation with employees on business decisions that affect them. Currently companies must have 50 plus employees and at least 10% of those employees (with a minimum of 15 employees) must support the implementation of ICE. As a result, ICE is not used that often. The committee have proposed that the thresholds are lowered and to include workers (not just employees) in the threshold criteria. Potentially this could change the dynamic between agency workers and the end client and give them a better voice to influence decisions that will impact them.
9 – Ending Swedish Derogation
Swedish Derogation is a clause of the Agency Worker Regulations which allows agency workers to be exempt of the right to equal pay to permanent equivalents after 12 weeks of service. Swedish Derogation reduces the admin burden of monitoring AWR but does mean the agency has to pay the agency worker for 4 weeks between assignments on at least 50% of their average basic wage for the prior 12 weeks (and not below NMW). Some would argue this is an unfair loophole while allowing agencies to pay temporary workers lower rates, however others argue it adds some level of job security to temporary workers. The Taylor Review did find abuse of Swedish Derogation and with little enforcement the committee have agreed that Swedish Derogation should be abolished. This would mean all agency workers, without exception, would be entitled to the same treatment (including pay) to the equivalent permanent employees once they have completed 12 week’s service.
10 – Deterrence
Getting closer to a level playing field? Both the Taylor Review and The Work and Pensions Committee both agree that non-compliant businesses should face significant penalties both financially but also reputationally so that this will act as both punishment but also deterrent to others. We welcome the targeting on non-compliance and any deterrent will help to create a level playing field which is still needed in the recruitment sector especially.
11 – Proactive Enforcement
The committee have suggested more resources to ensure proactive enforcement Currently the average firm can expect an NMW audit once every 500 years! It has also been suggested that there should be focused enforcement into certain sectors and geographical sectors and even supply chain wide enforcement.
As ever with the recruitment sector, legislation is also on the move. With high employment rates and Brexit looming these changes come at a busy time for recruiters. This draft legislation has not yet been debated in Parliament, but do we expect at least some if not all the changes will come into force. Although many of the changes, if passed, will not impact until 2020 Recruiters need to do their research now to ensure they are prepared for the additional burden.