Employment rights are a high priority for many company leaders – but do finance directors and others taking the lead around employment practices need to work harder to stay ahead of the shifting dynamics in this space?
This week the government was again pressed by the Law Society to rethink how it enforces employment rights after a slump in tribunal cases.
The professional body argued that the government needs improved powers to decide whether ‘gig economy’ companies are wrongly denying workers their rights. Its argument rests on a wealth of recent evidence that the tribunal system is not working.
The organisation has submitted its proposals to Matthew Taylor, the man tasked by Theresa May to conduct an independent review of whether the law is keeping pace with the changing world of work.
“If workers cannot access the rights parliament has given them then it is questionable whether these rights truly exist,” the Law Society argues in its submission to the now-overdue Taylor review.
So what should FDs look to address?
If the basic concern is that some employers treat staff like employees but classify them as self-employed, allowing them to avoid employers’ tax and the minimum wage, under that headline is lots more nuance to unpick.
One issue with tribunals is the fee that since 2013 has attached to bringing a case. The government has concluded the fee isn’t a block, but the number of employment tribunals is still down by 70% in four years.
The tribunal process can also take years, the Law Society notes.
Alongside the growth of the ‘gig economy’ through the employment practices of the likes of Uber and Deliveroo, FDs active in different sectors need to understand what’s driving the employment status of all staff and contractors in their space.
Alongside any proactive moves by companies, the Law Society has called for the Gangmasters and Labour Abuse Authority (GLAA) to be given the responsibility to investigate whether individual companies or sectors are acting correctly.
Under the proposal, if a company or sector disagreed with a GLAA determination they could challenge it in a tribunal. The GLAA would also be able to force the company to abide by the tribunal’s decision – using the threat of unlimited fines or even a two-year custodial sentence. The Law Society has also called for tribunal fees to be abolished.
“Where there is a dispute, our law relies on individuals taking their employer to court … [That’s] a task that is simply beyond most people,” said Robert Bourns, the Law Society’s president. “An independent government inspector who can go into a business to ensure staff are being given their proper workplace rights will . . . put everyone on a fair and even playing field.”
A think-tank called the Social Market Foundation (SMF) has also proposed big policy changes in its submission to Taylor.
The SMF argues that employers are incentivised to misclassify workers as independent because they have to pay less tax when contracting with a self-employed person than when employing someone directly.
The SMF has suggested this could be alleviated through the introduction of “hirers’ national insurance contributions”. This charge on those who hire contractors would start low, at 2%, but gradually increase until the contributions are equal to “employers’ national insurance contributions” of 13.8%.
All in all, and ahead of the Taylor Review being published and its recommendations picked up by government, it looks like FDs have a window of opportunity to act and ensure the company’s employment practices are beyond reproach.