What next? And how to future proof your organisation.
On the 11th July 2017, an independent report reviewing modern working practices, commissioned by the Government and authored by Matthew Taylor, was published.
The purpose of The Taylor Review was to set out how ‘good work for all’ can be achieved, which delivers two-way flexibility for workers and employers, and ultimately ensure a good work economy for the future.
A Government response is drawing nearer and is expected towards the end of 2017 – with many commentators indicating their belief that consultation and then legislation is extremely likely. So with, apparently, less than 8 weeks to go before an announcement as we write this – just what could a post Taylor Review workplace landscape look like, how will it affect organisations that hire temporary workers and what practical solutions can be put into play? As the UK’s largest and leading neutral vendor outsourcing specialist in the temporary worker market place, de Poel gives our predications – and provides some answers.
The first thing important to emphasise about the Taylor Review, is the myth that the report is all about the gig economy worker or self-employment. The reality is ‘traditional’ agency workers are also in focus too – and many of the recommendations made in the report would therefore impact on traditional models of contingency recruitment if they became legislation.
The report, which estimates that there are as many as 1.2 million agency workers in the UK, does not dispute the importance of the flexible workforce but it makes the argument that flexibility should not just be one-way and the balance should be redressed between organisations and workers. The report also argues that greater security for temporary workers is both feasible and desirable – and can be achieved without causing wider commercial, economic or labour market issues.
In particular, the report flags that some employers have found themselves stuck in the rut of relying on zero hours, short-hours or agency contracts, ‘when they could be more forward thinking’ in their workforce management. This fundamental belief at the heart of the Taylor Review is an issue which de Poel frequently encounters when we work with new clients. Not because there is a lack of willingness to adopt new ways of engaging contingent workers, but because there has never been any previous visibility of how the entire contingent workforce is engaged – and thus whether this picture reveals any issues or problems and, if it does, what the size of the problem is. Once de Poel is engaged we are able to shed light on this 360 degree view. We can conduct a risk analysis of moving to longer-term/fixed-term bookings vs. short term, help organisations create the appropriate commercial balance of temp-to-perm workers, advise on how our e-tips® system can integrate with planning and rostering systems and deliver bank solutions which still offer the flexibility attributed to zero hours but with greater security for the worker – for example a fair and ‘good work’ appropriate minimum hours floor.
Throughout The Taylor Review, a series of recommendations were made. We take a look at the seven suggestions with the most relevance for organisations that hire agency workers and analyse whether legislation is likely, the potential impact and how de Poel can help navigate a post-Taylor Review world.
1. Recommendation: Organisations should report on their employment models
The de Poel View: Reporting is likely to be implemented for larger businesses.
The Taylor Review recommends that businesses should state: a) How many zero contracts they offer
b) Who is classed as working on what status and c) That large employers should be required to publicly disclose how many agency workers they are using.
We believe that the suggestion to implement reporting is extremely likely to happen, given there are a number of precedents already in existence including gender pay gap reporting and BAME pay reporting. de Poel’s e-tips® system already supports a number of diversity reports for clients and can instantly calculate how many temporary workers are deployed at a macro and micro level including by geographical split, pay grade and business unit/job role.
One thing we would flag is that there may be some organisations who seek to create positive PR by publishing their temporary worker volumes or numbers of zero hour contracts ahead of everyone else and prior to any legislative deadline day – as PWC did back in 2014 when they announced their BAME pay figures. In our experience this can be a risky strategy and the risks in this particular case are likely to outweigh the gains of being a trail blazer. Temporary work has long been misunderstood and debate around what ‘good work’ is (and is not) in relation to contingent working remains contentious. As firm believers in and facilitators of the opportunities temporary work can bring, de Poel absolutely believe in being part of the debate and ensuring that a true understanding of temporary work is permeated. Indeed as Matthew Taylor says himself, “We advocate change but in doing so we seek to build on the distinctive strengths of our existing labour market.” However, as a any change meets established norms and already misunderstood practices, we would advise any organisation considering stealing a march on reporting to consider whether they would feel comfortable with news headlines such as: “Only one in 3 workers at [insert organisation] is an employee” or “ £x of profits made in 2017 at [insert organisation] ….but only 80% of workers are employed”.
2. Recommendation: Employee status should be renamed and clarified and tribunals should not be used to decide these statuses
The de Poel view: IR35 makes this suggestion likely to become reality.
The report makes it clear that the categories currently used of worker, employed and self-employed should evolve to become ‘dependent contractor’, ‘employed’ and ‘self-employed’ with clear distinctions between the three. The report additionally makes a strong recommendation that the burden of proof should be on the employer to disprove that a claimed working relationship exists, rather than an individual having to prove that it does not at a tribunal.
From a de Poel perspective, we would counsel that the 2017 IR35 changes in the public sector which shifted the burden of proof and liability towards organisations and away from individuals, shows a clear direction of travel which is likely to continue. In addition, the sheer number of gig economy cases tied-up in appeals and counter-appeals makes clarity highly desirable as tribunal costs and time spent on these matters soar.
3. Recommendation: Create a right to request fixed hours and permanent contracts
The de Poel view: This is one of the easier, less contentious suggestions that could be implemented. Which ultimately means watch this space, it is highly likely to happen.
The Taylor Review proposes that the right to request fixed hours and permanent contracts would apply to those who have worked for 12 months (and so established a degree of permanence) and would allow workers/dependent contractors to request a guaranteed hours contract based on the average weekly hours worked over the prior year.
We would suggest this is a proposal that is extremely likely to come to fruition given that other rights to request have worked well for all parties and are now firmly embedded, such as the right to request flexible working. This is due in part to the underlying principle which still gives the employer the ability and flexibility to decide on the outcome of each request on a case-by-case basis. The fact that this particular suggestion is backed by the CBI means you can expect this to go through.
From a ‘how do organisations manage this’ perspective we know from the work we have done with our clients, to ensure that long-standing temporary workers are given opportunities to go permanent, that MI from our e-tips® system can identify career temps. de Poel can model the commercial figures involved in transitioning temps to perms, and negotiate reduced or zero temp-to-perm agency fees. We can easily provide tracking for organisations seeking to manage requests or indeed proactively approach their workers ahead of the right coming into play.
4. Recommendation: Adapt current piece rate legislation so that data could be used to calculate wages per task.
de Poel View: Unlikely
The report argues that adapting the current piece rate legislation would mean people could work flexibly but have the opportunity to earn the minimum wage. However, platforms like Uber and Deliveroo would have to work out what the average ride or delivery would cost, on average, and make sure this totted up to the minimum wage based on the capacity per hour.
The complexity involved in these types of calculations and the difficulty of managing regional variations, means the de Poel team believe that this is one proposal that is extremely unlikely to culminate in firm legislation – particularly as it could be open to abuse or vagaries of the system. However, should the Government surprise the universal opinion held by most commentators on this one, de Poel’s e-tips® software system could be adapted to manage the tracking and data calculations.
5. Disband and disallow Swedish Derogation
de Poel View: Unlikely
As a reminder, Swedish Derogation is a mechanism whereby the AWR right to the same basic pay as comparable permanent employees after a 12-week qualifying period is waived in exchange for a contract of employment which pays the worker between assignments. The Taylor Review was clear that it viewed Swedish Derogation as a loophole that allows agency staff to be paid less than employees doing the same job and suggested that it was abolished.
This abolition would appear to to be an extremely unlikely outcome however, given the agreement to implement Swedish Derogation was a fundamental part of the original agreement between employers and the unions with regards to how to implement agency worker protections in the UK. Any move to change this would be extremely unpopular with businesses and we believe is highly unlikely.
We would still recommend you consider engaging de Poel to conduct a consultancy exercise to review the commercial differences when AWR operates as opposed to Swedish Derogation as, depending on the length of the assignment/contract, there can be significant difference. In the spirit of ‘good work’ that works for all parties, it is one to be sure of.
6. Reformation and better communication of Holiday Pay entitlements
de Poel View: A distinct possibility
The Taylor Review flagged that having a large workforce of people on zero hours contracts who do not take all their annual leave payments unfairly benefits organisations. The report called on Government to intensify their efforts in communicating who is entitled to holiday pay in the same way as they provide clear messaging every year on the National Minimum Wage (NMW) and National Living Wage (NLW). There was a clear call to “Reform holiday pay entitlements to make to easier for people in very flexible arrangements to receive their entitlements in real time as well as extending the pay reference period to 52 weeks for those who do not.”
This recommendation could become a distinct possibility. Recent case law, at the start of November, has hit the headlines from the red tops to the broadsheets and awareness of the need to request holiday pay is growing steadily. Pensions Auto Enrolment and NMW and NLW campaigns shows how awareness can be easy to increase. Should a clearer mandate be actioned around the communication of holiday pay, de Poel’s e-tips® system offers absolute clarity of how a worker’s rate of pay is formed with each aspect (the base pay rate, holiday pay, NI etc) clearly visible. Additionally, we can offer an extra check and balance on holiday pay through our system of agency audits.
7. A Warning on Apprenticeship Levy
de Poel View: A long-term view is best here
The seventh and final suggestion with the greatest potential influence of change for organisations with contingent workforces, was a clear call to Government to examine how the Apprenticeship Levy could be made to work better for those working atypically, including through agencies. Concerns were raised that whilst not illegal, the cost of the Apprenticeship Levy is (in some cases) being passed onto agency workers, thereby adding to the difference between the advertised rate for the job and what the individual receives in take-home pay. Concerns were also raised about the charges levied on recruitment agencies given temporary workers can rarely take-up apprenticeship opportunities.
Whilst it is not clear just what reforms may come from this warning, some changes would definitely be due for the better. The Apprenticeship Levy remains a difficult piece of legislation with many rough edges and unintended consequences. What is interesting is that the Apprenticeship Levy’s burden on recruitment agencies seems to directly contradict efforts and concerns from the Business, Energy and Industrial Strategy Committee that margin and charge rates are becoming too low to sustain a compliant way of working.
de Poel’s approach to the Apprenticeship Levy collection aims to redress this imbalance and minimises the risk that agencies will try and pass on the costs to agency workers, by accounting for Apprenticeship Levy as an on-cost and by ensuring these rates are locked down in the e-tips® system to deliver a fair outcome for all. Additionally we conduct checks on agencies to ensure monies are paid over to HMRC in an attempt to deliver a best practice approach whereby agencies are audited in terms of payments to candidates. Furthermore, we have formed a partnership with Lifetime Training (the Apprenticeship Training Provider) to ensure that workers can take-up apprenticeship opportunities wherever possible.
Of course, until any official announcement on ‘what next’, The Taylor Review (both as a whole and for the seven key areas we have analysed) is a watching brief. However, there is no denying that the direction of public dialogue and best practice means that many of the recommendations should be seriously considered by organisations ahead of firm legislation.
The de Poel market intelligence team are here to help organisations stay informed of developments post Taylor Review, and also to support with the application of practical solutions to ensure the flexibility between commercial requirements and good work is a win-win for workers and organisations alike.
For more information on how de Poel can assist please contact the market intelligence team at firstname.lastname@example.org.