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Government confirms implementation of some Taylor Review proposals

  • United Kingdom
  • Employment law


The Government has today revealed its proposals to implement various employment reforms, the majority of which emanate from last year’s Taylor Review1. Whilst some months off, as a result of Government’s latest Good Work Plan employers will need to be prepared to make a number of adjustments to their practices but also be prepared for a much greater crack-down upon any failings or omissions. In particular, the Government will: repeal the Swedish derogation; change the test for employment status to focus more on control and less on the right to substitute; introduce a day one right for all workers to receive written particulars; extend the holiday reference period to 52 weeks; empower HMRC to enforce holiday pay entitlements and make it much easier for employees to request staff information and consultation arrangements.


It is now several months since the Government Response to the Taylor Review proposals was published on 7 February 2018 (see our previous briefing). Whilst the Response was largely receptive to the extensive employment recommendations of Taylor, from improving clarity over workers’ rights and status, to better enforcement and oversight through a standards inspectorate and employment tribunals, just two steps were acted upon straight away and these will not take effect until 2019:

  • a requirement that all workers receive itemised payslips, stating the paid-for hours where these vary; and
  • increased penalties for ETs in the event of aggravated breaches.

However, the Government also undertook four consultation exercises in the first half of 2018, to allow it to research and consider some of the Taylor Review proposals in more detail. It also has the benefit of added insight from David Metcalf, Director of the combined enforcement agency, Labour Market Enforcement, whose strategy on behalf of HMRC, GLAA and EAS was published in May 2018 (LME strategy 2018).

Despite the few immediate changes to result from the Taylor Review, the Government has today announced that it now intends to proceed with many of the proposals:

Confirmed changes for enhanced workplace rights and protections

Access to written statements and payslips

The Government had already made the necessary legislative change to extend the right to a payslip to all workers from April 2019. Today’s announcement is that legislation will additionally give all workers a right to a written statement from day one, setting out enhanced information such as the expected duration of work, notice period, eligibility for leave (eg for sickness and maternity and pay during these periods), all remuneration (including vouchers, etc) and working hours/ days. (Agency workers will need to receive key facts information, as above).

Both the Taylor Review and LME Strategy 2018 were strong exponents of greater information and therefore transparency for workers. Pay slips and written statements of terms play a key part in this. As a day one right, however, employers will need to be organised at the point of hire so that this information is provided up front.
Employment status and worker rights

The rise in the gig economy has tested employment law, particularly legal distinctions between workers and the self-employed and the consequential tax or employment treatment. Whilst rejecting calls for a new legal definition of a “dependent contractor”, the Government has confirmed today that it intends to:

  • put forward proposals to better align the current framework of employment law and tax provision, reducing differences to an absolute minimum;
  • legislate to improve the clarity of the current status tests, potentially placing more emphasis on control and less on the right to substitution;
  • improve online tools and guidance.
Whilst in its consultation, Government focus appeared to be upon rogue employers who deliberately miscategorise workers as self-employed for their own advantage, there is no doubting the potential for confusion about status by employers and workers alike and for accidental misclassification. Additional clarification, which reduces misunderstanding, is therefore to be welcomed. However, as today’s report acknowledges, ensuring legislation is fit for purpose and able to adapt to future changes in evolving business models is not straightforward. There is still much research and discussion to take place, therefore, before any such proposals are progressed.
“Naming and shaming” over non-payment of ET awards

Figures suggest that a large percentage of ET awards go unpaid or are part-paid. The new scheme will therefore target defaulting employers to encourage payment of awards. Employers risk being identified if they fail to provide a satisfactory explanation for non-payment within 14 days of receiving a notification.

Employers will be aware of the current process of “naming and shaming” those who fail to pay the national minimum wage, a scheme which is intended to be mirrored here. Nearly 180 companies were publicly named for non-payment of NMW in March 2018. This is a blunt instrument, in itself unlikely to deter the very worst offenders. However, employers will not want to risk appearing on the list and, when coupled with planned enhancement to the enforcement powers for the ET and HMRC (see below), this could well provide significant incentive for improved payment rates of ET awards.
Improving access to holiday pay

Several steps are to be taken in this regard:

  • A holiday pay awareness campaign and new guidance;
  • HMRC is to be given the power to enforce statutory holiday pay (and in future possibly sick pay), as already occurs for NMW;
  • For workers with non-standard hours, the pay reference period over which holiday pay is calculated will increase from 12 weeks to 52 weeks.
In combination with increased penalties for defaulting employers, this change is significant and, despite Government concern about over-burdening employers, will almost certainly have this effect. As with the NMW currently, where workers raise a complaint the state enforcement body will pursue payment of arrears on the worker’s behalf, backed up by financial penalties. Calculating holiday pay (much like NMW) can be horribly complex in practice where working hours are not standardised, so employers need to review carefully their approach.
Greater transparency for agency workers

To improve clarity of the working arrangements of temporary workers and the way in which they are paid, the following changes are confirmed:

  • the role of EAS is to be greatly extended, giving it a remit over umbrella companies and intermediaries, initially focusing on those acting as intermediaries between employers and lower paid agency workers;
  • consultation is to take place on whether EAS should be able to fine non-compliant employment agencies as an alternative to prosecution;
  • the Swedish derogation is to be scrapped, so that it will no longer be possible to exclude agency workers from the equality provisions of AWR through use of “pay between assignment contracts”;
  • Agency workers will need to receive “key facts” information, including (in addition to current information under the Conduct Regulations) who is responsible for their employment, any element of pay from an intermediary, any fee and relevant benefits.

A particular concern identified in the Taylor Review was an imbalance of power between organisations and workers, described as “one-sided flexibility”.

A significant change for certain sectors will be the scrapping of the Swedish derogation, which may now prompt many to revisit their arrangements with employment businesses, as well as their employment models.

Increased responsibility and resource for EAS is something the LME Strategy 2018 had sought. This will introduce external scrutiny of agency working and enforcement of rights, rather than relying predominantly on enforcement by the workers themselves. By extending their reach to intermediaries also, the risk that workers’ rights become confused through third party chains will be reduced significantly.

Guidance on an appropriate format of “key facts” information is expected but failure to provide the information adequately or at all, will give rise to enforcement action by EAS.

Changing the basis of continuous working

Qualification for certain employment rights requires a minimum period of continuous service. To alleviate disadvantage to employees working non-standard arrangements, continuous service for this purpose will not be deemed broken where there is a gap between assignments or pause in work of up to 4 weeks (as opposed to the current limit of 1 week).

Employees engaged in atypical working involving non-consecutive assignments, will often struggle to establish continuity of service in order to accrue employment rights. Preserving continuity over a longer break-period of a month will increase opportunity for access to employment protections but also deter bad employers from imposing very short, artificial breaks in service as a means of reducing their liabilities.
Right to request more certain hours

After 26 weeks in post, legislation will allow all employees and workers with varying hours and shift patterns (including agency and zero hour workers) to formally request a more fixed working pattern that is more predictable and stable. This may take the form of greater certainty over hours or working days.

One of the greatest criticisms of zero hours contracts was the seeming “pick up, put down” working culture which resulted in some cases. Whilst not yet revealed, it seems most likely that the new legislation will mirror the “right to request flexible working” regulations already familiar to employers. By extending this right to workers as well as employees, businesses will be encouraged to review how they use flexible workers, whilst more workers will benefit from improved regularity of work and financial security.
Stronger enforcement

In addition to enhancing enforcement of holiday pay (above), the following are also proposed:

  • an increase to the maximum level of penalty that ETs can impose in instances of an aggravated breach, from £5,000 to £20,000 and a new obligation on ETs to consider the use of sanctions where employers have lost a previous case on broadly comparable facts;
  • encouraging businesses at the top of supply chains to work with their suppliers to take corrective action when employment law non-compliance is identified (with greater consultation with HMRC, or another enforcement body to enable collaboration over corrective action);
  • the GLAA licensing standards to be reviewed to ensure that they reflect current worker rights and employer obligations;
  • the three main enforcement bodies (EAS, HMRC and GLAA) will work more closely together, pooling information, and increase cooperation with the Insolvency Service and Acas, in a bid to improve overall labour market enforcement. However, it seems likely that a new, single labour market enforcement agency, providing a single point of contact for individuals and with additional powers and resources, is to be created in due course.

The Government recognises that a fundamental aspect of reform is ensuring that enforcement powers are in place but moreover utilised, particularly in relation to more vulnerable workers.

Recent years have seen dramatic recruitment of HMRC enforcement officers and today’s report similarly anticipates an increase the number of inspectors within EAS. The combined effects of the potential penalties, naming and shaming and resource behind enforcement could well have profound influence on behaviours going forwards.

Other changes of note:

  • Lowering the threshold required for a request to set up Information and Consultation arrangements from 10% to 2% of employees (the 15 employee minimum threshold will remain);
  • In relevant sectors (primarily hospitality) a ban is to be imposed on employers making deductions from staff tips;
  • The Low Pay Commission has rejected the Taylor Review’s proposal of a higher minimum wage for non-guaranteed hours for flexible workers and, instead, made three recommendations: a right to compensation where shifts are cancelled without reasonable notice; a right to reasonable advance notice of work schedules; and, a right to move to a more stable contract which goes further than a right to request, for example, employers would need to justify any refusal. The Government has said it will consult on these issues;
  • Reflecting legitimate employers concerns over the way the NMW Regulations apply to salaried workers, salary sacrifice schemes and more generally, the Government has launched a consultation today on changing the rules to alleviate the unnecessary penalisation of employers (and, indirectly, their workers where salary sacrifice may be removed as a result). This is to be welcomed given the inflexible and unsatisfactory nature of aspects of the law as currently drafted.


Many of these reforms (such as repeal of the Swedish derogation for agency workers and written statements for all workers) require legislation, drafts of which have been published, indicating they will take effect from April 2020. The proposals have also been well-received on the whole, suggesting even a change of government in these turbulent times may not prevent their progress.

How to revise current tests of employment status and some other proposals will need to await further consultation or review and are not expected until later next year at the earliest.


In its Good Work Plan, the Government states its aim to significantly change the enforcement landscape with the above changes. In particular, the Government is concerned to better protect vulnerable workers with stepped up enforcement from HMRC, EAS and the GLAA. Employers should expect a new push on holiday pay from enforcement bodies, with the focus on lower paid, casual and agency workers and whether they are receiving their full entitlement. Given the complexity of calculating holiday pay for non-standard workers, businesses should carefully review their approach.

Key to abbreviations

AWR Agency Workers Regulations 2010
Conduct Regulations The Employment Agencies and Employment Businesses Regulations 2003
ET Employmeny Tribunal
EAS Employment Agency Standards inspectorate
GLAA Gangmasters and Labour Abuse Authority
HMRC HM Revenue & Customs
NMW National minimum wage

1 For further information about the independent Taylor Review of Employment Practices in the Modern Economy, see briefing here.