How could the government's response to the Taylor review affect contractors?

It’s the largest update to workplace rights in a generation. Under the new legislation, workers will get details of their rights from the first day of a new job, including eligibility for sick leave and paid holiday.

What is the Taylor Review?

The Taylor Review of Modern Working Practices was an inquiry into the issues affecting flexible workers, more commonly known as the gig economy. The review largely focussed on agency workers and workers on zero-hour contracts, including how to protect them from exploitation.

The review culminated in a report called ‘Good Work’ which outlined 53 recommendations to be made to employment law, especially in the so-called gig economy. The government has chosen to bring forward 51 of the 53 recommendations made.

What will the new legislation mean for contractors?

Workers on zero-hour contracts, agency employees or gig economy workers are to be better protected by the new legislation. It will end the Swedish derogation loophole which allows firms to pay agency workers less than permanent staff.

Under the new legislation, workers will be given details of their rights from the first day of their contract. This will include entitlement to sick leave and pay and information regarding other types of pay, such as maternity and paternity.

Deemed workers will now be eligible for paid holiday and the holiday pay reference period is being extended from 12 to 52 weeks. This means that seasonal workers, or those in atypical roles, get the paid time off that they are entitled to.

Alongside these changes, the government has released a paper explaining their plans to name and shame employers who are unwilling to pay employment tribunal awards. The maximum employment tribunal fines for employers who have shown malice, spite or gross oversight has been quadrupled from £5,000 to £20,000. This is an idea that was taken directly from the Taylor Review, to ensure stricter penalties are in place to deal with employers who choose to ignore the jurisdiction.

The effect the government’s response to the Taylor Review will have on agency workers

Many contractors find temporary employment contracts via recruitment agencies. Agencies play an important role in explaining how take home pay will be determined for these workers and the associated rights, and to also set contract rates.

Some agency workers experience confusion regarding contract rate versus pay rate, who is paying and employing them (if they are not genuinely self-employed) and what their take home pay will be after all relevant deductions are made.

In an attempt to give better transparency to agency workers the review states that it is now a requirement for the employment businesses to issue a key facts page to agency workers on their first day of employment clearly detailing this to achieve better transparency and compliance.

Employment status may be aligned with tax status

The government has hinted at aligning employment status with tax status in the future. This is an attempt to clarify the boundaries between employment, self-employment and worker. The plan indicates a change by referencing an upgrading of control, and down grading of personal service (right of substitution test).

The plan also aims to improve online guidance and tools to help people to understand and determine their employment status. However, the use of tools to determine employment status for tax purposes (for example, the CEST tool) should be seen as nothing more than guidance as reliance on a questionnaire to determine tax status is not steadfast.

The regulation of umbrella companies

The government plans to continue to regulate umbrella companies and the 2017 changes to the off-payroll rules in the public sector has resulted in an upsurge of new payroll intermediaries.

Many umbrella companies claiming to be “compliant” have been found to not be meeting the requirements of certain professional bodies that aim for total industry compliance.

The government is looking to increase enforcement action against non-compliant umbrella companies and other payment intermediaries.

Stay up to date on legislation involving contractors and agency workers

There is plenty of legislation out there directly concerning contractors and agency workers, which will soon include the Good Work recommendations. It’s important to know the ins and outs of these topics in order to be successful as a contractor; one area you must be aware of is Supervision, Direction and Control (SDC). Visit our blog if you aren’t sure how this relates to you or the wider contractor and agency worker industry.

Churchill Knight & Associates Ltd offers various payroll options including limited company accountancy and umbrella company PAYE to suit your working circumstances. Try our take home pay calculator below to see how much you could legally be taking home through these payroll options.

Alternatively, if you would like to speak to one of our friendly experts please call 01707 871622, or request a call back to discuss our payroll options further.

* Calculator for illustration purposes only and uses assumptions. Limited figures based on 52 weeks, expenses £50 per week, £9,100 salary and accountancy fees included. As of 1st April 2023, there is no longer a single rate of Corporation Tax. The calculator uses assumptions and estimates and is designed to be accurate by individual circumstances will vary. Umbrella figures based on 52 weeks, £15 per week margin and holiday pay paid out. For a more accurate calculation tailored to your requirements, please contact Churchill Knight today by calling 01707 871 622 or contact us here.