A framework for modern employment Contents


The Prime Minister spotlighted the burning injustice a growing number of British citizens experience at work as she stood on the steps of Downing Street for the first time after her election:1

If you are from an ordinary working-class family, life is much harder than many people in Westminster realise. You have a job but you don’t always have job security.

I know you’re working around the clock, I know you are doing your best, and I know that sometimes life can be a struggle. The Government I lead will be driven not by the interests of a privileged few, but by yours.

We will do everything we can to give you more control over your lives [ … ] When we pass new laws we’ll listen not to the mighty but to you.

The Prime Minister’s speech reflected concerns that changes in the world of work, while contributing to Britain’s prosperity, have also driven the growth of a vulnerable workforce. The expansion of self-employment and business models built around flexible work on digital platforms promise positive opportunities for entrepreneurs, workers and consumers alike. But these changes also create confusion about the rights and entitlements of workers, and add to the potential for exploitation. Evidence tells us this exploitation is already occurring. This raises the important question of what changes to legal and regulatory frameworks are required to protect workers in the modern labour market. It is this question that the Government asked Matthew Taylor to address in his Review of Modern Employment Practices.

Some of Matthew Taylor’s recommendations can be satisfied through changes to policy or secondary legislation, but the most transformative require primary legislation. Our two Committees have joined together to propose the legislation that will help deliver the Prime Minister’s objectives. We have produced a draft Bill that would take forward the best of the Taylor Report recommendations. We hope the Government will engage with the spirit of our draft Bill, and will not hold against us any deficiencies in drafting. This is presented alongside the proposals on which we have collected evidence and which we believe should be part of a new protective legislative framework.

Responsible businesses have nothing to fear from our recommendations. Indeed, they stand to benefit from the level playing field we seek to create. A willingness to exploit workers should not be a competitive advantage. A race to the bottom risks undercutting the vast majority of businesses that do treat their workers well.

Employment rights and entitlements are linked to employment status. It is difficult for the average worker to understand what category of status they fall into unless they have an extensive knowledge of case law. We agree with the Taylor Review that there is an urgent and overwhelming case for increased clarity on employment status. This could be provided by primary legislation reflecting the case law that has already been built up. Receiving a statement of employment terms and rights on day one of a new job would also help employees and workers better understand their rights and entitlements. Combining legislative clarity with this improved awareness should alleviate confusion amongst workers and employers alike, reducing both exploitation and the burden on the courts.

The Government must also close loopholes that enable dubious business practices. Recent court cases have exposed a pattern of companies using bogus self-employed status as a route to cheap labour. Implementing a model of worker status by default for companies with substantial dependent workforces currently labelled as self-employed would better protect such workers. The onus would be on the firm to prove self-employed status, when disputed, rather than on the worker to do so through the courts. This measure must not place unnecessary burdens on genuine self-employment, which is a positive choice for many individuals. Where tribunals remain necessary, they could be more effective. Implementing new, higher fines for companies that have previously lost similar tribunal cases would provide a powerful deterrent. Changes to legislation to enable class actions—claims brought on behalf of groups of workers—to establish employment status would also minimise the burden on individual workers.

Achieving “worker” status, however, is often not enough to alleviate insecurity at work. The volatile availability of paid work is a pressing concern for many workers. Some workers on low hour contracts welcome the flexibility they bring, but others are not well served by this model. The employer has no obligation to provide work and the risk of low demand is borne by the worker. A wage premium above the National Minimum Wage and National Living Wage on non-guaranteed hours could potentially help rebalance the benefits, and might prompt employers to consider offering more stable work: for example, by providing shift details and staff rotas in advance. We propose the Government work with the Low Pay Commission to pilot such an approach to tackle the abuses perpetrated by some companies. The Government should also make it easier for workers and employees to have a say on decisions that affect them at work, and should end practices that leave agency workers open to exploitation.

The Government should set out how it sees the power and resources of the Director of Labour Market Enforcement (LME) developing over the next five years. The strategy and powers of enforcement bodies and the Director of LME must produce a real deterrent against non-compliance with the law. Currently, employers can expect an inspection of their labour practices once every 500 years—and receive only paltry fines if they are found to be breaking the law.

The enforcement bodies and the Director of LME urgently need more resources, so that a more proactive approach to rooting out bad practice becomes a living reality for bad employers, and hence a deterrent. This expansion should be paid for by a significant increase in the fines made to offending employers. Other measures would tilt the balance in favour of compliance without the need for additional expenditure. Companies that flout the law, and those that tolerate exploitation in their supply chains, should be “named and shamed”. Enabling enforcement bodies to issue punitive fines for noncompliance would also help ensure that the risks of being caught outweigh the gains companies stand to make from illegal practices. Concentrated “deep dives” in industry sectors and geographic areas, where there is evidence of abuse, by all the enforcing bodies should become a regular part of the armour to protect vulnerable low paid workers.

As it seeks to negotiate the best possible Brexit deal, the Government must not allow addressing urgent issues in Britain’s labour market to fall by the wayside. In line with the Prime Minister’s declaration as she entered Downing Street, we call on the Government to seize the impetus the Taylor Review has created to improve workers lives and prioritise legislating on the issues we have set out. We are mindful that Government resources are harnessed to Brexit legislation. Our Committees therefore stand ready to discuss with civil servants and Ministers what role we might play in this process. This includes the key question of whether our Committees might be given legislative time to take through a Bill, with Government support.

We support the Prime Minister’s ambition of addressing issues of unfairness and injustice in Britain’s labour market. Our joint report shows there is strong support for this ambition across all parties. We are confident the Prime Minister will be able to secure support from across the House in taking these reforms forward.

1 Prime Minister’s Office, Statement from the new Prime Minister, 13 July 2016

17 November 2017