Many companies may sidestep Labour’s improve of staff’ rights by hiring workers as contractors or informal staff, if the federal government delays a key reform of employment standing, consultants have warned.
Authorities officers are racing towards time to finalise a draft invoice Labour has promised to introduce inside 100 days of taking workplace, paving the way in which for sweeping reforms to present staff extra safety and bolster the function of commerce unions.
The bundle of some 75 measures, billed as “The Plan to Make Work Pay”, will embrace restrictions on using zero hour contracts, safety towards unfair dismissal from day one, wider protection of statutory sick pay, a default right to flexible working and harder guidelines on using controversial “fire and rehire” ways, amongst many different modifications.
A lot of these measures will want additional, secondary laws which would require session with employers and unions that would drag properly into subsequent yr, in line with ministers.
Legal professionals, union officers and enterprise representatives have warned that staff is not going to essentially profit from the reforms, if employers stay in a position to exploit gray areas in legislation over their employment standing.
It is because corporations can have new incentives to take folks on as self-employed contractors, temps or company staff, who’ve fewer rights, fairly than as workers.
“A reform that plugs a niche in a single leaky pipe produces a gushing geyser elsewhere, as a result of [employers’] technique to treatment it’s to take folks out of safety altogether,” argues Michael Ford, a barrister and knowledgeable in labour legislation.
“Should you don’t handle employee standing and the way intermediaries and different strategies are used to take folks exterior the safety . . . you threat undermining the entire edifice,” he added.
The UK is uncommon in having three varieties of employment standing: workers, self-employment and an intermediate class often known as limb (b) staff.
This third group has some worker rights — together with the minimal wage, vacation pay and pension auto-enrolment. However it’s not coated by some key worker rights Labour plans to strengthen — corresponding to statutory sick pay, redundancy rights and safety towards unfair dismissal.
Crucially, limb (b) staff are additionally handled as self-employed for tax functions, that means employers don’t have to pay nationwide insurance coverage contributions on their earnings.
In apply, it’s usually troublesome to ascertain which class folks fall into, particularly in components of the gig financial system the place atypical working preparations are prevalent. Regardless of a landmark Supreme Courtroom ruling in 2021, which decided that Uber’s drivers have been staff, unions are nonetheless preventing authorized challenges towards many different employers.
Labour has promised to cease employers exploiting this ambiguity by switching to an easier, two-part framework, with a single standing of employee and a transparent distinction between staff and the self-employed. However due to the complexity of the reform, it doesn’t plan to handle it in October’s draft invoice, as a substitute flagging it as a measure “that may take longer to overview and implement” and promising a “full and detailed session”.
Each unions and enterprise teams fear that urgent forward with different reforms, with out resolving the basic problem, may backfire.
“Throughout the bundle there’s a actually essential query on employment standing . . . The ambition to finish essentially the most malign practices needs to be tied up with discovering a strategy to simplify the system,” mentioned one union official.
“It’s essential that session on employment standing isn’t a further afterthought,” the official mentioned.
“Logically, you’ll begin with employment standing, in case you had the luxurious of doing issues in a logical and sequential method,” mentioned Ben Willmott, head of public coverage on the CIPD physique for HR managers.
The CIPD, though frightened that a few of Labour’s reforms will probably be pricey for enterprise, helps the ambition to place “clear blue water” between the self-employed and a brand new, single class of staff.
Rewriting employment standing will probably be controversial and fraught with issue, nonetheless — particularly given the potential tax implications.
“If you will take a look at employment rights and standing, you must take a look at every part and take a look at tax as properly,” Ford notes.
Recruitment businesses say a distinction between employment and self-employment doesn’t match the fact of a contemporary labour market the place each companies and people need flexibility.
Even some unions are cautious. Mike Clancy, common secretary of Prospect, says staff’ standing has “rightly” been left for later session, as a result of imposing a mannequin of direct employment wouldn’t work in sectors corresponding to TV and movie the place he represents freelancers.
Some attorneys additionally warn that any try and impose boundaries may merely lead unscrupulous employers to evade their obligations by slipping new clauses into contracts.
“Individuals don’t work in methods which can be straightforward to classify,” mentioned Jonathan Chamberlain of the Employment Legal professionals’ Affiliation. “In case you have clear statutory guidelines . . . actors within the system will recreation it.”
