The Government response to employment status consultation
Back in February 2018, the Government launched a consultation on the subject of employment status, following publication of the Taylor Review of Modern Working Practices (2017).
A response to this 2018 consultation has now finally been published, confirming that there will be no legislative reform to the current rules relating to employment status. Whilst the majority of respondents to the consultation agreed that there are issues with the current system, there was very little consensus on what should be done to improve it.
The Government has acknowledged the problems with the existing three-tiered system (comprising employees, workers and self-employed), but considers that it provides the right balance for the UK labour market, giving it the necessary flexibility. Legislative reform might bring clarity in the long term, it says, but the Government is concerned that it might create costs and uncertainty for businesses in the short term.
Instead of legislative reform, the Government has published new employment status guidance aimed at clarifying how the law works in practice. This non-statutory guidance (meaning that it has no binding authority) has been published in three separate parts:
- Detailed guidance for HR professionals, legal professionals and other groups
- Guidance for individuals
- Checklist for employers and other engagers
The detailed guidance includes an explanation of the differences between employees, workers and the self-employed, and the rights to which each category is entitled. It also sets out the key factors for determining employment status, although it emphasises that only a court or tribunal can make a final determination on employment status.
Alongside this new employment status guidance, existing guidance on calculating the national minimum wage has been updated with a new section on gig economy and platform-based workers, explaining what counts as ‘working time’ for calculating the national minimum wage entitlement for such workers.
Banning exclusivity clauses: new regulations
Draft regulations have been laid before Parliament to prohibit exclusivity clauses in the employment contracts of low income workers (those earning at or below the lower earnings limit, currently £123 a week).
The Draft Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 extend the current restrictions on the use of exclusivity clauses, making such clauses unenforceable. Employees will be protected from unfair dismissal if they breach an exclusivity clause in their contract, and workers will be protected against any detriment.
Similar provisions have been in place for zero-hours workers earning above the lower earnings limit since 2015. The new Regulations will come into force 28 days after they are made, likely to be in early autumn, after the summer recess.
Public sector exit payments
The Government has issued a new consultation on proposals for a new ‘administrative controls’ process for public sector exit payments over £95,000. The stated intention is to “allow for additional scrutiny and assurance of exit decisions”, supporting the Government’s “wider ambition to reduce the use of large exit payments in the public sector”.
Previous regulations, in force between November 2020 and March 2021, were intended to limit public sector exit payments above £95,000. These were revoked in March 2021 due to the “unintended consequences” of the cap and various legal challenges.
The new (non-statutory) proposals are to introduce an expanded approval process for employee exits and a requirement for exits involving a total payment of over £95,000 to be approved by a Secretary of State. This figure will include relevant statutory, contractual and discretionary payments.
In addition, approval for special severance payments (payments in excess of contractual obligations, of any amount) will be required from HM Treasury. If a total exit payment exceeds £95,000 and also includes a special severance element, it will require approval by both a Secretary of State and HM Treasury.
These proposals apply to all relevant parts of the public sector, including all central government bodies and bodies that do not have a specific right to make exit payments (as set out in its Framework Document, Articles of Association, Board Terms of Reference, or elsewhere). The consultation states that the new approvals process will not serve as a way of capping large exit payments, but the process will enable the Treasury to “offer greater guidance and challenge to the employers in scope”.
The Government also considers that special severance payments made in central government should be recoverable in certain circumstances, when an individual finds new employment in the public sector. It envisages that this would be through the inclusion of specific repayment clauses, presumably under the terms of a settlement agreement.
Draft guidance on public sector exits has also been published alongside the consultation, setting out the criteria for employers to consider before deciding on the exit of an employee and agreeing any special severance payments, and the process for approval.
The consultation will close on 17 October 2022, so the new process would take effect at some point after that date, subject to any changes made as a result of the consultation exercise. The Government states in the consultation paper that it will keep its policy under review and assess whether further legislation is needed in due course.
It is not surprising that the Government is persisting in its long-held ambition to limit the amount of exit payments paid to departing public sector employees, given it is a manifesto commitment. Previous attempts to do so through statutory mechanisms have failed, largely due to entitlements to early retirement pension payments well in excess of the £95,000 cap. These latest proposals will create a further administrative burden for public sector employers, who will need to ensure that they have procedures in place to seek the necessary approvals and comply with the record-keeping requirements.
Acas Annual Report
Acas has published its Annual Report for 2021 to 2022, showing that it dealt with nearly 91,000 early conciliation notifications during the period covered by the report, with just over a third (31,000) going on to lodge an employment tribunal claim and only 7% resulting in a hearing.
Acas positively resolved 36% of early conciliation cases, an increase from 31% in 2020-2021. Of those cases where an employment tribunal claim was lodged, Acas resolved 77%. It also settled 94% of the 510 collective disputes that it dealt with. The majority of these disputes were pay related, with changes to terms and conditions and recognition agreements also featuring highly.
For more information on the topics discussed in this article, please contact Liz Stevens or a member of Birketts’ Employment Team.
Key Contacts
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at August 2022.