A framework for modern employment Contents

Conclusions and recommendations

Clearer statutory definitions of employments status

1.Questions of employment status are often not clear-cut, and legislative reform would not entirely eliminate the need for the courts. But it is evident that clearer legislation on employment status could be valuable in preventing confusion and promoting fair competition between businesses. This would lessen the need to go to court, and most importantly, protects vulnerable workers. We recommend the Government legislates to introduce greater clarity on definitions of employment status. This legislation should emphasise the importance of control and supervision of workers by a company, rather than a narrow focus on substitution, in distinguishing between workers and the genuine self-employed. We have set out our proposals in Part 1 of our draft Bill. (Paragraph 10)

Worker by default

2.Relying on individual tribunals as a corrective to companies’ systematic use of questionable self-employment models places an unacceptable burden on workers to address poor practice, while the companies themselves operate with relative impunity. We recommend the Government legislate to implement a worker by default model, as set out in Part 2 of our draft Bill. This would apply to companies who have a self-employed workforce above a certain size defined in secondary legislation. (Paragraph 15)

Non-guaranteed hours

3.Companies benefiting from a flexible workforce must ensure that this flexibility is not one-sided, either by guaranteeing hours that reflect the periods worked each week, or by compensating workers for uncertainty. We recommend that the Government work with the Low Pay Commission to pilot, for workers who work non-contracted hours, a pay premium on the National Minimum Wage and National Living Wage. The Low Pay Commission should be responsible for identifying suitable companies to be included in this pilot, based on workforce size and turnover. Proposed legislation to enable this is set out in Part 3 of our draft Bill. (Paragraph 21)

Continuous service

4.Companies who benefit from a flexible but committed workforce should still guarantee rights when workers reach the necessary qualifying period, even when there has been a gap in service. We recommend that the Government extend the time allowance for a break in service while still accruing employment rights for continuous service from one week to one month. We have set out proposals in Part 5 in our draft Bill. (Paragraph 25)

Employment tribunals

5.Workers frequently rely on the employment tribunal system to establish their rights. But restrictions on class actions and the absence of penalties for widespread abuses may incentivise employers to “wait and see” whether individuals are willing to risk pursuing their rights. We recommend that the Government creates 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 further recommend that the Government takes steps to enable greater use of class actions in disputes over wages, status and working time. Our proposals are set out in Part 4 of our draft Bill. (Paragraph 31)

Flexibility and the National Minimum Wage

6.A flexible labour force can provide benefits to workers, consumers and businesses. What we do not accept is that the gig economy should burden workers with all the risks of this flexibility. They should not be faced with a choice between not working and working for below the minimum wage. We recommend the Government rules out introducing any legislation that would undermine the National Minimum Wage/National Living Wage. (Paragraph 36)

Entitlement to a written statement of employment particulars

7.Workers should be better equipped with the knowledge to identify if they are being treated unfairly at work, and to challenge poor practice with confidence. A requirement to set out rights and entitlements will be beneficial to good businesses, helping to root out noncompliant organisations and create a more level playing field. We recommend that the Government extends the duty of employers to provide a clearly written statement of employment conditions to cover workers, as well as employees. We further recommend that this right apply from day one of a new job, with the statement to be provided within seven days. This change should be made by secondary legislation under s23 (4)-(5) of the Employment Relations Act 1999. (Paragraph 40)

Lowering the Information and Consultation of Employees (ICE) threshold

8.Making it easier for employees and workers to have their voices heard at work would send an important message about the significance the Government ascribes to good corporate governance. Currently, some workers most at risk of exploitation—those on worker contracts—are not covered by regulations intended to promote an employee voice. Even employees in organisations that are eligible may be prevented from exercising this right by the prohibitively high threshold for application of the regulations. We recommend that people on worker contracts, as well as employees, be counted towards the 50 workers needed before a company is covered by the ICE regulations. We also recommend the threshold for implementation of the regulations be reduced from 10% to 2% of the workforce. This would require amending secondary legislation under s42 of the Employment Relations Act 2004. (Paragraph 45)

Ending the Swedish Derogation

9.All agency workers should be entitled, without exception, to the same treatment as permanent employees once they have completed 12 weeks’ service. The Swedish Derogation loophole is subject to widespread illegal abuse to the detriment of both agency workers and legitimate agency employers. The Taylor Review was right to call for its abolition. We recommend the Government amends the Agency Worker Regulations 2010 to remove the opt-out for equal pay. We further recommend that the Employment Agency Standards Inspectorate be given the powers and resources it needs to enforce the remainder of those regulations. (Paragraph 51)


10.Compliance with the law is a minimum standard that any employee or consumer should expect from a business. We agree with the Taylor Review that businesses who choose not to comply should face significant penalties to their finances and reputation, as punishment to them and a deterrent to others. Punitive fines and a robust enforcement regime that is fair, and perceived to be fair by the public, the vast majority of businesses and their workers, would increase the public’s confidence in the role of business in society. We recommend that the Government brings 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 by businesses and supply chains. (Paragraph 59)

Proactive enforcement

11.We welcome the Government’s establishment of a Director of Labour Market Enforcement. The enforcement agencies he oversees must have adequate resources to take a more proactive approach to identifying and deterring abuses. We recommend that the Government provides the Director of Labour Market Enforcement and the main enforcement agencies with the resources necessary to undertake both reactive and proactive roles, including deep-dives into industrial sectors and geographic areas, and supply-chain wide enforcement actions. Where extra resources are needed, they should be funded through higher fines on noncompliant organisations. We also recommend that the Government sets out, in response to this report, how it intends the powers and resources of the Director of Labour Market Enforcement will develop over the next five years. (Paragraph 65)

17 November 2017