20th Sep 2017
Last week we published part one of our two-part series on the UK’s changing economy. Picking up where we left off, in this second part we take a deeper look at the politics of managing the lower skilled ‘gig’ economy.
This much we know: for many well-paid contractors with work offers flowing from the public sector, these are unsettling times. Their status as independents is now being decided, in some quarters, by a public body, in line with a recent HMRC policy shift.
But what about the rest of the UK’s self-employed? If our piece last week zeroed in on the impact of IR35 and questioned how well it squares with the government’s commitment to a flexible economy, this week’s follow-up is a chance to consider the broader picture and priorities on the road ahead.
When it comes to the government’s position, arguably this is now being set by the recently published Taylor review, even if so far it appears to have generated more questions than answers.
Launched in July this year with no little fanfare, including an outing for the prime minister, the Conservative-commissioned review focuses on framing how employment rights might need to be updated, with special attention on the rise of a low paying, insecure ‘gig’ economy.
The review picks out among other things the issue of “one-sided flexibility” in the employment space today, with some employers appearing to transfer all risk onto the shoulders of self-employed workers in ways that make people more insecure.
So what the UK needs to formalise, argues Taylor and his four-strong review team, is the status of a “dependent contractor” that distinguishes some vulnerable workers from those who are legitimately self-employed.
The politics of work
There is plenty to unpick in relation to the report, and the politics of its publication is a useful place to start.
Jason Moyer-Lee, general secretary of one trade union – the Independent Workers Union of Great Britain – responded to the publication of the report by arguing that the prime minister Theresa May “seems intent on using the review to claim the pro-worker mantle for the Tories, providing her with a number of policies she could implement with little cost to government, little burden on employers, and no tangible impact on workers – but that would help the Tory narrative.”
Moyer-Lee doesn’t stand in isolation in seeing a missed opportunity. Well beyond the trade unions, there has been widespread scepticism about quite how the report will usher in tangible change, on the basis that its arguments about the need for fairness and decency in the working practices in the UK economy have not been framed sufficiently robustly.
‘Fair and decent’
What’s included? The review:
- calls for ‘fair and decent’ working practices, built around a national strategy for work that’s explicitly directed toward the goal of “good work for all”.
- argues that the same basic principles should apply to all forms of employment in the UK economy – with a fair balance of rights and responsibilities that offer a baseline of protection for workers.
- says platform-based working (which facilitates exchanges between two or more groups, usually consumers and producers), needs to deliver genuine two-way flexibility for all parties
- pushes for a new status of “dependent contractor” that distinguishes some workers from those who are legitimately self-employed.
- says business should step up – regulation not being the answer to everything. “The best way to achieve better work is not national regulation,” says the report, “but responsible corporate governance, good management and strong employment relations within an organisation. [ It] is important that companies are seen to take good work seriously and are open about their practices and that all workers are able to be engaged and heard.”
The question for business and government becomes how these kind of changes will be delivered in practice. Critics argue that many issues we see today could already be dealt with through more rigorous government enforcement of employment law, through wiping out fees for employment tribunals (a recent supreme court ruling could usher this in) and through extending more of the rights that apply to employees to all workers.
Some strong, balanced ideas are put forward, including extending sick pay and the right to statements of employment particulars, but the impression we are left with is a mixed bag of possible moves in the years ahead, most of which will need to be pinned down to be effective in enabling the UK economy to flex while workers accumulate more certainties.
Here are seven responses to the review that frame what lies ahead for businesses:
British Chamber of Commerce:
“If the new category of 'dependent contractors' proposed by the review is implemented, it must have a clear legal definition to prevent any ambiguity or unintended knock-on effects.
“The government should consult widely with business and employees over the coming months to ensure any response to the Taylor Review is proportionate, fair and above all unbureaucratic.”
Confederation of British Industry:
“Changes to the application of the minimum wage, rewriting employment status tests and altering agency worker rules could have unintended consequences that are negative for individuals, as well as affecting firms’ ability to create new jobs.
“The government will need to consider these aspects extremely carefully, alongside proposals for any future tax changes, to ensure our labour market retains the flexibility and entrepreneurship that has made it the mainstay of the UK economy.”
Institute of Directors:
“Additional clarity to the ambiguous definitions of employment status in the UK [is welcome]. It will reassure most employers, who often shy away from offering employee-style benefits to their self-employed contractors for fear of exposing themselves to legal challenges.
“[And] despite the often one-sided narrative that surrounds the gig economy, it is welcome to see the review recognises the value of flexible labour to the UK economy and to individuals themselves.
“The proposal to ask gig platforms to provide real-time information on the earning potential of individuals at any given point is a good one. “
Engineering Employers’ Foundation:
“We support any initiative that encourages responsible employers. Manufacturers respect the impartial and evidence-based work that the independent low pay commission currently does, and we strongly believe it should continue in its current format.”
“The creation and definition of a ‘dependent contractor’ would definitely be helpful but could be quite difficult in practice given the wide range of working practices covered by the review.
“The extension of some rights to the most vulnerable ‘gig’ workers would be popular with many. That said, the extension of holiday pay, sick pay and some of the National Minimum Wage protections could mean businesses need to spend a fair bit of time projecting what the cost of extending those rights will be.”
“Some of it is pretty sensible, such as the principle that if you're self-employed for tax purposes you should also be considered to be self-employed for the purpose of employment rights.
“But there are also some proposals that will materially increase costs and administration for employers. It remains to be seen whether the government will have the political will, not to mention the parliamentary support, to implement much of this in an already very busy legislative agenda.”
Institute of Economic Affairs:
“Taylor’s recommendations are likely to achieve little to reduce in-work poverty, while increasing costs.
“These costs will be passed to consumers in higher prices for taxi rides and home deliveries, and to workers in terms of reduced net pay and fewer, and less varied, employment opportunities. The gig economy empowers consumers over businesses, and these new recommendations could overturn this balance.
“Since the new gig economy has blurred the old regulatory distinction between employment and self-employment, politicians and their paid advisers have naturally concluded that we therefore need yet more regulation.”
There will always be disagreement between employers and those representing employees about priorities in mapping the future of work. That much is surely true.
What’s striking about the current context for the UK is how many other uncertainties and tensions abound, whether in relation to the unfolding gig economy the status of the established contractor with IR35, the future of employment tribunals, or even how the Brexit shake-out will ultimately play for the country.
In an uncertain world, some big choices and big moves way well lie ahead – and business in all its many guises needs to ensure it is shaping those moves as well as responding to them.