The future of working practices in Scotland Contents

Conclusions and recommendations

Employment status and modern employment practices

1.New employment practices and business models have challenged traditional understandings of employment status and made it increasingly difficult for workers and employers to be confident in their judgments of when a particular employment status applies. While the majority of employers treat their workers properly, it is clear that some inappropriately treat their workers as self-employed to reduce their own obligations. Definitions that were set out in law decades ago have been tested to breaking point by new relationships between companies and their labour force, and there is a clear need to review how employment status is defined, to ensure employees and workers are guaranteed the appropriate rights and protections. We welcome the Government’s recognition of the problems resulting from the current lack of clarity, and its consultation on how best to achieve greater clarity in this area, including legislative change. We also welcome the Government’s acceptance of the Taylor review’s recommendation that the right to a written statement of terms and conditions be extended to all workers. (Paragraph 25)

2.We welcome and endorse the recommendations the Taylor review made for clarifying employment status in primary legislation, as well as those of the Business, Energy and Industrial Strategy and Work and Pensions Committees, and call on the UK Government to bring forward legislation to clarify the employment status of workers. We also see the merit in shifting the burden of proof for demonstrating employment status—where this is challenged—to employers, so that it is easier for individuals to access employment rights. We note that the Government has said it will return to this recommendation when it has reached decisions on possible changes to employment legislation, and created an online tool to help workers determine their employment status, and recommend that the Government revisit this recommendation once it has completed these processes. (Paragraph 26)

3.Contracts which support flexible working can provide benefits for both workers and employers, but it is important that these arrangements are mutually beneficial and do not provide the employer with all of the benefits, with workers carrying all of the risks. While many people on zero hours contracts are content with them there are clearly issues with employers who use them exploitatively. These issues need to be addressed without undermining the flexibility these contacts can offer, which many employers and employees find valuable. We endorse the recommendations made by the Taylor review that workers who have been on zero hours contracts for 12 months be able to request a contract which reflects actual hours worked, and that the Government should commission the Low Pay Commission to consider a higher minimum wage for hours which are not guaranteed. We welcome the Government’s acceptance of these recommendations, and urge the Government to implement them as soon as is practicable. These measures will ensure that workers cannot be kept on a zero hours contract indefinitely, where it does not reflect the reality of employment, and will also create an incentive for employers to ensure that they only use these contracts where there is a real need for them. (Paragraph 32)

Unfair employment practices

4.We are deeply concerned by the unfair and illegal employment practices we have heard about during this inquiry. Although it appears that these issues affect only a small proportion of workers, it is not known how prevalent unfair employment practices are in Scotland. We recommend that the Government commission a study to assess the extent of unfair employment practices in Scotland—to establish how many workers suffer from unfair or illegal employment practices, and whether there are particular issues in certain sectors. The Government should set out the work it is commissioning in its response to this Report. (Paragraph 35)

5.We note with concern the decrease in employment tribunal cases which were brought following the introduction of fees for applications to employment tribunals, and welcome their recent revocation, which in our view will increase access to justice for workers. Employees should not have to pay to enforce their rights. (Paragraph 39)

6.It is deeply concerning that more than half of all employees who win a case at an employment tribunal do not receive the compensation they are due, and we also recognise the concerns raised by the Business, Energy and Industrial Strategy and Work and Pensions Committees that the absence of penalties for widespread abuses may incentivise employers to “wait and see” whether individuals are willing to risk pursuing their rights. We endorse Matthew Taylor’s recommendation that employers who fail to pay employment tribunal awards should be named and shamed, welcome the Government’s acceptance of this recommendation, and call for it to be implemented as soon as is practicable. (Paragraph 44)

7.We concur with the conclusions and recommendations of the Taylor review and the Business, Energy and Industrial Strategy and Work and Pensions Committees, which called for the Government to create an obligation on employment tribunals to consider the increased use of higher, punitive fines and costs orders if an employer has already lost a similar case. We welcome the Government’s consultation on how best to implement this recommendation, and call on the Government to bring forward stronger and more deterrent penalties, including punitive fines, for repeat or serious breaches of employment legislation, and expand “naming and shaming” to all non-accidental breaches of employment rights. The planned transfer of responsibilities for employment tribunals to the Scottish Parliament will mean that these measures will need to be discussed with the Scottish Government, and we welcome the UK Government’s commitment to working closely with the Scottish Government in this regard. (Paragraph 45)

8.We welcome the Government’s commitment to tackling non-compliance of minimum wage law, and the presence of a team within HMRC specifically tasked with this issue, but we share the concerns expressed by the Business, Energy and Industrial Strategy and Work and Pensions Committees about the resourcing and effectiveness of enforcement efforts. (Paragraph 50)

9.We welcome the appointment of a Director of Labour Market Enforcement to set strategic priorities for employment enforcement agencies to “stamp out exploitation”, but the UK Government has not yet put in place the mechanisms and resources which are necessary to tackle unfair employment practices. We recommend that the Government put in place new mechanisms—which could include the establishment of additional enforcement agencies—to proactively identify and combat all unfair employment practices. We note that HMRC already takes a proactive approach in identifying employers which do not pay the minimum wage, and recommend that similar mechanisms be used to tackle other unfair and illegal employment practices. (Paragraph 53)

10.We welcome the Minister’s evidence that there has been a reduction in blacklisting, but her acknowledgement that the practice “will not have been eradicated altogether” means there is still work to be done, and we note with concern the evidence from union representatives that blacklisting is “as bad as it ever was”. We recommend that the UK Government work with the trade unions to establish the current extent of blacklisting, and set out in response to this Report how it will do so. If blacklisting is found still to be in operation, the Government must publish any evidence of blacklisting it uncovers, and bring forward proposals to eradicate the practice and provide remedies for workers who have been blacklisted. (Paragraph 57)

Productivity and industrial strategy

11.We note that both the UK and Scottish Governments hold powers which affect the economy and labour market in Scotland, and welcome the priority both governments have placed on improving productivity and wages in Scotland. This includes the UK Government’s new industrial strategy, which covers areas of both reserved and devolved policy. Given the division of responsibilities between the UK and Scottish Governments, we ask the UK Government to—in its response to this Report—set out which areas of the industrial strategy will apply in Scotland. This should include details of what funding organisations in Scotland will be able to apply for directly, and what areas of funding will result in additional resources being transferred to the Scottish Government. (Paragraph 63)

12.Given the shared responsibility the UK and Scottish Governments have with regards to shaping policy which affects Scotland’s economy and labour market, co-operation between the two governments is essential. We welcome the Government’s commitment to establishing Ministerial Forums on Industrial Strategy with each of the devolved administrations, to bring together relevant UK departments and the devolved administrations to consider how the Industrial Strategy can best address key productivity barriers in Scotland. We note the then Minister for Small Business, Consumers and Corporate Responsibility’s statement that how these forums would work would “evolve”, and call on the Government to, in their response to this Report, set out in detail how these will work in practice. (Paragraph 67)

Devolution and employment support

13.Funding for employment support programmes is under significant pressure, and cuts to spending by the UK Government on programmes which have now been devolved to the Scottish Government have reduced the funds which have been transferred to the Scottish Government, which will have full responsibility in these areas. We recommend that, where the UK Government is planning to change spending in a way which will affect devolved funding, the Government engage with the devolved administrations at the earliest possible opportunity on implications for devolved policy. In the case of employment support programmes, we call on the UK Government to enter into discussions with the Scottish Government about whether there is a case for additional funds being transferred to Scotland to enable these programmes to be enhanced. (Paragraph 71)

2 March 2018