Make Work Pay – the upcoming Employment Rights Bill
A significant part of the Labour Party's campaign ahead of the general election in July was in relation to reforming worker's rights. In line with this, the government will be announcing the key aspects of their plan to make work pay in the form of a first draft of the employment rights bill, by the end of next month. There are many changes they have proposed to bring in which include (but are not limited to):
- Ending fire and re-hire practices
- Banning "exploitative" zero-hour contracts
- Day one rights i.e., all workers will have rights to parental leave, sick pay and the right to claim unfair dismissal from day one
- Making flexible working the default position for all workers from day one
- Single status of worker
- Right to switch off
As part of the changes to employment law, Angela Rayner, deputy prime minister, has also specified that the government will create a fair work agency to prosecute and fine companies that breach employment law. There have been criticisms of this as, although the exact level of fines has not been revealed, any such sanctions will have a great impact on smaller businesses.
The chief of external affairs at the Federation of Small Businesses, Craig Beaumont, was quoted in The Times stating “A public agency should not be fining UK small businesses thousands of pounds for their existing employment, simply because they don’t provide formal corporate tick-box bureaucratic policies and paperwork. That overreach would be a devastating inadvertent consequence.”
Small business, including family businesses, may not have the resources to deal with fines. Companies should look at the contracts they have in place now and consider whether they are compliant with the relevant employment law provisions whilst also ensuring that any contracts of service / employment contracts are reflective of the true working relationship.
Currently, there are often issues when identifying the exact status of an individual to determine whether they are an employee, worker or self-employed contractor. There is not a fixed definition in legislation which determines whether an individual is an employee, worker or self-employed and case law has shown that employment tribunals have expressed that contracts are not the determining factor in coming to such decisions and in fact they will look at the facts and the day-to-day practices of the working relationship. Factors taken into consideration include whether the individual is expected to accept all work provided, if they can appoint a substitute for their work, whether they are provided with equipment such as a laptop by the employer for the purposes of work, etc.
Although bringing in a single worker status could prevent confusion between the different statuses, it has been held that it could also make businesses more reluctant to hire new people particularly in the hospitality or retail industry where flexibility (in the form of zero-hour contracts) is required to deal with changes in business throughout different seasons.
There are also obviously different tax consequences depending on an individual's employment status however, it is important to note that simply becomes HMRC deems a person to be self-employed for tax purposes, it does not mean an employment tribunal would reach the same conclusion - the tribunal could in fact deem the person to be an employee based on various other factors.
It will be interesting to see how the draft employment rights bill provides for these measures to be bought in particularly as the government has emphasised throughout the process they have listened to both businesses and workers to ensure the changes take into consideration all views.
Whether you are an employer, employee, worker or contractor, if you would like us to review any of your existing contracts or policies in light of the incoming changes or if you have any queries in relation to the new changes to employment law, please do not hesitate to contact Piers Larbey (piers.larbey@hunterslaw.com) or Priya Mohanakumar (priya.mohanakumar@hunterslaw.com) in our corporate commercial department.