The Taylor Review and the effect on SME’s

Thursday July 5, 2018

The much anticipated Taylor Review was published this week. Authored by Matthew Taylor, a former advisor to Tony Blair, the 166 page document recommends seven key changes to how those working in the “gig” or sub-contract economy should be treated. But how will the proposed changes affect SMEs?

"SME owners believe that gig economy workers create flexibility and allow better workplace management"

Define who is a “worker”

The government should use primary legislation to clearly define who counts as a “worker”. Including creating an intermediate employment status in the UK with fewer rights than employees but more rights than independent contractors. The status would be defined by how much control the employer exerts over the individual. This status of such employees will be renamed “dependent contractor”.

This status will mostly benefit those who prefer flexible working as they will be granted more “fairness at work”.

Ensure gig economy “piece rates” exceed the national living wage

Dependent contractors operating on the gig economy platforms must receive at least the national living wage on a “piece rate” basis. Assuming periods of normal demand, gig rates should flex upwardly to ensure the national living wage (£7.20 p/h for those over 25) is met on a shift by shift, hour by hour basis.

Currently most “piece rates” are fixed and gig workers earnings are based only on how many “pieces” or “gigs” they claim eg. A Deliveroo courier is paid a fixed rate per delivery regardless of demand. If demand only requires one delivery in an hour at a piece or gig rate of £2.00, the workers earnings for that hour will be only £2.00, £5.20 short of the national living wage requirements.

Align tax with employment status

If the government embraces this particular recommendation, tax status will be aligned with employment status. Meaning that companies will have to pay national insurance contributions for people classed as “dependent contractors”.

End agency worker loophole

A pre-existing loophole which allows agency workers to be paid less than permanent staff doing the same jobs may be closed.

Enforced holiday pay and sick pay

Dependent contractors will be granted holiday pay and sick pay. HMRC who monitor and manage the implementation of minimum wage may also be responsible for enforcing the legislation.

A higher minimum wage for zero hours workers

The low pay commission is being encouraged to consider a higher minimum wage structure for non-guaranteed hours. A blatant attempt to discourage employers favouring zero-hours contracts, this recommendation aims to abolish zero-hours culture. It also states that zero-hours contracted employees should have an obligated “right to request” a fixed hours contract after a period of 12 months.

Developing skills

Everybody should feel that they have realistically attainable ways to strengthen their future prospects at work. Regardless of employment status (Dependent, zero-hours etc) individuals should be able to develop their skills through formal and informal learning in addition to on and off the job activities.

Employers could be obligated to offer such opportunities.

So what in summary does all this mean for SME’s?

It appears that the report has rushed to address concerns and problems created by the “gig” economy big businesses; Uber, Deliveroo, DPD etc. The needs of SMEs appear to have been principally lost or ignored in the review.

SMEs currently make up 48% of the UKs “real economy” and of this more than a quarter are employee gig economy workers. SME owners believe that gig economy workers create flexibility and allow better workplace management.

The recommendations of the Taylor Review relating to employment status change will undoubtedly impact upon profitability. However Socially Grown believe the greater affects are likely to be witnessed in the governance and audit adaptations that change will bring.

Also not to be underestimated is the “employee power” that such legislative shifts encourage. Every sub-contract or gig employee will feel empowered to challenge their status and be quite justified in doing so. Tribunals will undoubtedly follow if SME employers are not willing to recognise status and transform employment policy.

SMEs need to remain up to speed with these proposed changes to ensure they are not caught out by either an employee or HMRC.

Keep me posted

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