Good Work Plan – what does it mean for business?

United Kingdom

At the end of last year we reported on the publication of the Good Work Plan in December 2018. This is the government’s vision for the future of the labour market and the action it will take to implement the recommendations made in the Taylor Review, launched in November 2016.

It has been over two years in the making and many feel it is long overdue, but it has been described as a disappointment. For those waiting for clarity on employment status, the wait is not over. For those wanting to maintain the status quo little is changing in the short term.

Although billed as the “biggest package of workplace reforms for over 20 years”, the Good Work Plan doesn’t read like that. Whilst the Prime Minister has committed to not only maintain workers’ rights when the UK leaves the EU but also to enhance them, the Good Work Plan sets out very little in the way of concrete steps to achieve this.

The uncertainties in dealing with Brexit are looming large and it is likely that Brexit informed the content of the Good Work Plan. Although it gives us a possible roadmap for the future of UK employment law, in the absence of firm steps on key points, the government can back track should they need to.

What does business need to know?

We have set out below a reminder of some of the key things that are set to change.

(a) Day one statement of written terms

The government has legislated to require written statements of terms to be given on or before the first day of employment. This will come into effect on 6 April 2020. This requirement will apply to all workers, and not just employees. Previously employers had two months to provide the statement to employees. The statements will be required to include the following additional information:

  • whether there is a probationary period;
  • more detail around hours and days of work and whether these may be variable;
  • details of other paid leave (in addition to holidays);
  • any training entitlement provided by the employer; and
  • benefits not covered elsewhere in the statement.

HR will need to ensure that all workers and not just employees receive their statements on day one. Standard form contracts and/or offer letters may need updating. Workers whose existing statements of terms do not include the required information will be able to request a revised statement of terms.

Whilst this requirement is intended to enhance worker protection by providing workers information to which they previously may not have had access, it will not help those who are (mistakenly) classified as self-employed or otherwise denied worker status. Workers/employees will still only be able to bring claims for failure to provide the information if they have another claim.

(b) Goodbye to the Swedish Derogation (pay between assignments contract)

From 6 April 2020 Swedish Derogation contracts (otherwise known as “pay between assignments” contract) for agency workers will be unlawful.

By way of a reminder, currently agency workers are exempt from the right to equal pay (including holiday pay) with permanent employees if an agency worker enters into a permanent contract of employment with a temporary work agency, under which they continue to be paid a minimum amount between assignments.

The Taylor Review produced evidence that some agency workers are not receiving pay between assignments in practice, because they are kept on very long contracts (and they do not have breaks).

Businesses that currently use the Swedish Derogation to minimise the costs of engaging agency workers will need to consider ways to mitigate the cost impact.

(c) Change to holiday pay reference periods

The reference period for determining a week’s pay for the purpose of calculating holiday pay will be increased from 12 to 52 weeks (or complete weeks worked if less than 52) from 6 April 2020.

The intention is to protect vulnerable workers from missing out on holiday pay, and to grant them greater flexibility on when to take holiday.

If you routinely engage casual workers or have a bank of staff on variable hours, this may represent a cost increase to your business. We recommend you model the potential financial impact and consider whether your current record keeping arrangements will enable you to adjust to this change.

(d) Increase in compensation for aggravated breach of employment law

The government has also increased the maximum penalty that employment tribunals can grant for aggravated breaches of employment law from £5,000 to £20,000 from 6 April 2019.

This will only impact a small number of cases where employers have behaved reprehensibly. The government’s intention is that in the future the increase will be coupled with an obligation on employment tribunals to consider the use of sanctions where employers have lost a previous case on broadly comparable facts. Again, we would expect this to apply in the minority of cases, noting that the bigger the employer and the larger the group of employees affected by a particular decision, the more possible this outcome becomes.

(e) Threshold to request an information and consultation forum reduced from 10% of employees to 2%

From 6 April 2020 the threshold required for employees to request to set up information and consultation arrangements in the workplace will go from 10% to 2% of the total number of employees employed by the employer, although this is still subject to there being a minimum of 15 employees.

The government wants to encourage greater employee engagement to improve performance and productivity. To date there has been very low take up of this right by employees, but it remains to be seen whether the lowering of the threshold will trigger an increase in requests.

(f) Don’t panic!

Given the Taylor Review made 53 recommendations that the government has considered and responded to, the above represents modest change in the short term. For now there is not much else for employers to do other than to become familiar with the government’s further proposals for change, prepare for the impact it will have on your businesses and to keep in touch with developments.

What should you look out for going forward?

(a) Right for all workers to request a more predictable and stable contract

The intention is that workers with 26 weeks’ of service or more will be able to ask for greater certainty in terms of the hours they work.

The key point here is that it will be a right of request which must be considered by the employer but with no guarantee that it will be granted. We are presuming that it will work in a similar way to the right to request flexible working, but details are currently limited.

(b) The time required to break a period of continuous service will be increased from 1 week to 4

For those who engage seasonal or casual workers, this change will be one to keep an eye on because in theory it will mean that workers could gain access to employment law rights more easily. However, for this change to have a real impact workers will need to be aware of the change and its possible repercussions.

Impacted employers should consider how they will keep track of when continuity of service is reached, and that they are aware what difference it will make to workers.

(c) Banning employers from making deductions from staff tips

Described as a good faith move intended to restore fairness to the service industry. For those in affected industries, regardless of whether you currently pass on staff tips or not, we recommend that when the legislation comes into effect (in addition to ensuring compliance) it may be worth checking contracts and policies are reflective of the change.

(d) Further changes to holiday pay

In addition to its firmer plans to increase the reference period for calculating holiday pay (see above) the government intends to:

  • launch an awareness campaign to boost awareness of rights and aid understanding in calculating holiday pay;
  • introduce new guidance to support businesses and individuals to interpret holiday pay rules (which can be complex); and
  • introduce an online holiday pay calculator to complement the above.

Holiday pay claims show no signs of abating, and if claimants group together the financial impact can be extensive. Please get in touch if you would like to discuss further.

(e) Reintroduction of employment tribunal fees

Whilst nothing explicit was said in the Good Work Plan, we consider it likely that the government will reintroduce employment tribunal fees. We would not expect fees to be at a similar level to the previous fee regime deemed unlawful by the Supreme Court. The number of employment tribunal claims is unlikely to slow down any time soon.

The above is not an exhaustive list of the recommendations from the Taylor Review that the government intends to take up. For a reminder of the full list, please refer to our previous law now or the Good Work Plan itself.

What about employment status?

The government recognises that there must be clarity on whether an individual is an employee, worker or self-employed, and whether their status is the same for tax purposes.

The future of employment status is the elephant in the room in the Good Work Plan. The employment tribunals and the courts have soldiered on in recent years, endeavouring to keep up with the impact of the gig economy on laws that were not designed to consider such workers. Whilst the government has indicated that it will legislate to improve clarity on employment status, and it will bring forward proposals on aligning the tax framework, in the short term all the government has done is commission research to “find out more” about those with uncertain employment status and how it affects them.

We do not know what questions are being asked, and when they are required to be answered. It is clear those who think we need it will be waiting a long time for reform, and in the meantime, it is likely that those pursuing test cases and the employment tribunal itself will continue to be the main drivers for change in this area.

We recommend that organisations continue to remain on top of this area as it develops.

Good work?

One final question that the Taylor Review and the Good Work Plan raises is what exactly is “good work”? The Good Work Plan is billed as “the first time that the government has placed equal importance on both quantity and quality of work” (emphasis added). To this end it has asked the independent Industrial Strategy Council to consider the most appropriate way to measure quality of work, which it considers is made up of the five principles: satisfaction; fair pay; participation and progression; wellbeing, safety and security; and voice and autonomy. However, with Brexit looming and the stability of the economy in question, “good work” could end up taking a back seat.