The results of an independent review of UK modern working practices was published last month. The comments therein about improving the rights and entitlements of the self-employed are interesting in the wake of media suggestions that the Government will not now revisit previously abandoned plans in the Spring Budget to increased self-employed Class 4 National Insurance Contributions (“NICs”).

According to the report, HMRC estimates that the government loses out on £5.1bn a year from the lower rates of NICs paid by the self-employed.

Enforcement of rights

HMRC features in the report in the context of its enforcement role for both the National Minimum Wage and Statutory Sick Pay. The report also suggests that HMRC should also assume responsibility for enforcing holiday pay rights.

In addition, the Government should ensure that exploitative unpaid internships are stamped out by clarifying the interpretation of the law and encouraging enforcement action taken by HMRC in this area.

Self-employed pension auto-enrol?

For self-employed individuals, the report moots whether the self-employed should pay 4% of income towards a pension unless they choose to opt out with HMRC potentially responsible for collecting this.

The hidden economy

At Spring Budget, the Government set out next steps on how to tackle the hidden economy. According to the report, the concept of conditionality has significant merit and could become the springboard for a much more radical move towards promoting cashless transactions.

Conditionality involves making access to licences or services needed to trade conditional upon tax registration.

The report suggests that the Government should consider how embracing the move towards cashless transactions can both support self-employed people and consumers in making informed decisions as well as supporting HMRC in addressing the tax gap by looking to extend the principles of conditionality as far as possible.

The report’s seven point plan

“Good Work: The Taylor Review of Modern Working Practices” considers the implications of new forms of work on worker rights and responsibilities, as well as on employer freedoms and obligations. It sets out a seven point plan to address the challenges facing the UK labour market, which is reproduced below:

1. The UK’s national strategy for work should be explicitly directed toward the goal of good work for all, recognising that good work and plentiful work can and should go together.

As part of this, the same basic principles should apply to all forms of employment in the economy – there should be a fair balance of rights and responsibilities, everyone should have a baseline of protection and there should be routes to enable progression at work.

Over the long term, in the interests of innovation, fair competition and sound public finances the taxation of labour should be made more consistent across employment forms while at the same time improving the rights and entitlements of self-employed people.

Technological change will impact work and types of employment and the UK needs to be able to adapt, but technology can also offer new opportunities for smarter regulation, more flexible entitlements and new ways for people to organise.

2. Platform based working offers welcome opportunities for genuine two way flexibility and can provide opportunities for those who may not be able to work in more conventional ways.

These should be protected while ensuring fairness for those who work through these platforms and those who compete with them. Worker (or ‘Dependent Contractor’) status should be maintained but it should be clearer how to distinguish workers from those who are legitimately self-employed.

3. The law and the way it is promulgated and enforced should help firms make the right choices and individuals to know and exercise their rights.

Although there are some things that can be done to improve working practices for employees, the ‘employment wedge’ (the additional, largely nonwage, costs associated with taking someone on as an employee) is already high and the UK should avoid increasing it further.

‘Dependent contractors’ are the group most likely to suffer from unfair one-sided flexibility and therefore the UK needs to provide additional protections for this group and stronger incentives for firms to treat them fairly

4. The best way to achieve better work is not national regulation but responsible corporate governance, good management and strong employment relations within the organisation, which is why it is important that companies are seen to take good work seriously, are open about their practices and that all workers are able to be engaged and heard.
5. It is vital to individuals and the health of the UK economy that everyone feels they have realistically attainable ways to strengthen their future work prospects and that they can, from the beginning to the end of their working life, record and enhance the capabilities developed in formal and informal learning and in on the job and off the job activities.
6. The shape and content of work and individual health and well-being are strongly related. For the benefit for firms, workers and the public interest the UK needs to develop a more proactive approach to workplace health.
7. The National Living Wage is a powerful tool to raise the financial base line of low paid workers. It needs to be accompanied by sectoral strategies engaging employers, employees and stakeholders to ensure that people – particularly in low paid sectors – are not stuck at the living wage minimum or facing insecurity but can progress in their current and future work.