Press release

Employment review launched to improve clarity and status of British workforce

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Business Secretary launches a wide-ranging employment review to help clarify and potentially strengthen the employment status of workers.

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Business Secretary Vince Cable has today (6 October 2014) launched a wide-ranging employment review to help clarify and potentially strengthen the employment status of up to a million British workers.

This follows the recent review and upcoming legislation of zero hours contracts, which revealed that an increasing number of people in the UK who could be on ‘worker’ employment contracts which have fewer basic rights (such as unfair dismissal or maternity pay) than the vast majority of people who are on ‘employee’ contracts.

In many instances workers are not aware of their employment status and therefore what employment rights they are entitled to. Many employers are also unsure what rights their workforce is entitled to, running the risk of legal challenge if they get something wrong. As a result, government is also unable to collect meaningful data and get a complete picture of the overall workforce.

Officials at the Department for Business, Innovation and Skills will today start the process of determining how clear the current employment framework is, what the options are to extend some employment rights to more people and whether there is scope to streamline this very complex area of employment law, thus simplifying and clarifying rights for both employers and employees.

Business Secretary Vince Cable said:

One of the most striking features of our recession has been the high levels of employment that our workforce has maintained during some very trying times. Employers were resourceful in the jobs they continued to offer and employees remained flexible in the work patterns and pay they agreed to. That was the right thing to do at the time to keep Britain working.

However now the economy is firmly on the road to recovery, it is important that the fruits of the recovery are shared by all. Some types of contracts which offer fewer employment rights, and which were never designed to be widely used, have become much more commonplace. As the economy recovers, it is right to explore giving a silent minority of workers the security and rights enjoyed by the majority of employees. Confident, secure employees spend money, which is ultimately good for UK plc.

Workers should not be finding out that they are not protected by law once they get to employment tribunal. We need a system that is fair, simple and transparent - an environment where businesses feel more confident knowing what type of contracts to hire staff on and where individuals know their rights and have the security they deserve.

Currently, many individuals cannot be certain what their employment status is until they are at an employment tribunal. If they are a ‘worker’, it is at this point they could realise they do not have any legal protection if, for example, they are seeking a claim for unfair dismissal.

The government wants to prevent this from happening where possible, so both the individual and employer are clear at the time of recruitment what rights are available. This should also encourage workers and employers to discuss problems instead of heading to the tribunals.

Officials expect to present interim findings by the end of the year, and hope to submit recommendations for next steps to ministers by March 2015.

Notes to the editors:

1.Government estimates there may be up to a million people on ‘worker’ contracts but the review will seek to offer further clarity on numbers by working with statistical experts, think tanks and employment lawyers.

2.Everyone working for an employer in the UK is entitled to first day rights such as the National Minimum Wage and the right not to be discriminated against. They are also entitled to paid annual leave and rest breaks. Employees, in addition to these, are also entitled to rights such as paid maternity leave, protection against unfair dismissal and the right to request flexible working.

3.Case studies:

a. Claiming maternity pay: A woman has been working in a supermarket for 2 years on a zero hours contract, but wants to take paid maternity leave; she may not be able to determine whether this is a right she’s entitled to. If her employer says no, she would have to rely on an employment tribunal to decide.

b. Claiming statutory sick pay: An individual is hired on a zero hour contract to stock shelves at their local supermarket. The job is taken to provide ad hoc income to support them through university. The individual has no set shifts but sometimes work regular hours, especially during the summer holidays. One summer, the individual breaks their leg and is unable to work. The supermarket informs them that as the relationship casual, the individual is a ‘worker’ and not entitled to claim sick pay. The individual claims that they have been regularly undertaking work for the supermarket for a period of 2 years so are an ‘employee’ and eligible for sick pay. Early conciliation is unsuccessful as both sides believe their position is correct and the individual decides to take the supermarket to an employment tribunal. Regardless of the tribunal decision, the individual is no longer offered shifts by the supermarket

c. Flexible working entitlement: The extension of the Flexible Working Regulations has ensured that all ‘employees’ on zero hours contracts with 26 weeks of continuous service can make a statutory request for regular hours or a specific shift pattern. However, while CIPD figures inform us that around 1.4 million individuals are employed on these contracts in the UK, we cannot be sure how many are entitled to make a statutory request and so are unable to know whether there is merit in further extending the right. This is because we can never know for certain how many employed individuals fall into the ‘employee’ or ‘worker’ bracket. It could be that extending this right to all ‘workers’ has little or no additional merit but there is currently no legal clarity on this.

4.The review will look at all range of employment status – including employee, worker and self-employed.

5.Without prejudging the review, the review could potentially deliver some of the following outcomes:

Potential extension of employment rights: With a better understanding of employment status, we can properly assess whether the allocation of employment rights is appropriate. It could be that a better understanding of the makeup of the UK labour market identifies areas where employment rights are not applied in the way we would wish. For instance, it could be that after further analysis, an extension of all employment rights to ‘workers’ is not overly costly or bureaucratic to business (especially if the analysis shows the current group to be small).

Greater transparency and clarity: Employment law that can be easily understood by individuals and employers should lead to a better employment relationship – especially if this is clear from day one. If this happens, there is likely to be less confusion over what rights an individual is entitled to and so less chance of unnecessary conflict. An indirect benefit of this clarity could be a reduction of cases ending up in employment tribunals. In addition, for those groups who will always find themselves in a grey area (there will always be complex cases that require a court hearing), specific guidance, or even legislation, could provide clarity, reducing the need to rely on the courts for resolution.

Additional job stability: Both zero hours contracts and agency workers are utilised responsibly by many businesses and are the contract of choice for many individuals. However, it is possible that both these types of employment can be used for the wrong reasons. For instance, some businesses may choose to use agency staff because they do not want the perceived hassle of hiring permanent staff. Clarifying their responsibilities may result in some of them deciding to hire people on permanent contracts. Likewise, some employers may use zero hours contracts because they perceive it means individuals have fewer rights. This isn’t true in the current employment framework but additional clarity could result in more individuals being given regular hours if the employment right myth is addressed.

Table of current Employment Rights (excluding self–employed)

Right Employee Worker Self-employed
Unfair dismissal: If an employee is dismissed, their employer must show they have a valid reason that they can justify and that they acted reasonably in the circumstances. Yes    
Minimum notice: Employees must be given at least the notice stated in their contract or the statutory minimum notice period, whichever is longer. Yes    
Statutory redundancy pay: After 2 years with the same employer, any employee will become entitled to a statutory minimum level of redundancy pay. Yes    
Collective redundancy consultation: If an employer is making 20+ employees redundant, a consultation should take place between the employer and employee representative. Yes    
TUPE: When a business changes owner, its employees are be protected under the Transfer of Undertakings (Protection of Employment) regulations (TUPE). Yes    
Maternity/Paternity/Adoption leave and pay: After a qualifying period of 26 weeks, an employee is entitled to statutory levels of maternity, paternity and adoption leave. Yes    
Flexible working requests: All employees with 26 weeks continuous service can make a request for flexible working which the employer can only refuse on a number of business grounds. Yes    
Fixed-term status (less favourable treatment): Employees on fixed-term contracts receive significant protection against less favourably treatment than comparable employees on permanent contracts. Yes    
National Minimum Wage: The National Minimum Wage is the minimum pay per hour that workers are entitled to by law. Yes Yes  
Protection from unlawful deduction from wages: An employer is only allowed to make deductions from wages if it meets certain conditions such as it being required or allowed by law. Yes Yes  
Paid annual leave: Employees and workers are legally entitled to 5.6 weeks’ paid holiday per year (known as statutory leave entitlement or annual leave). Yes Yes  
Rest breaks: Employees and workers over 18 are entitled to 3 types of rest break - rest breaks at work, daily rest and weekly rest. Yes Yes  
Discrimination: The law protects employees and workers against discrimination at work, including dismissal, employment terms and conditions, pay and benefits, promotion and transfer opportunities, training, recruitment and redundancy. Yes Yes Yes
Part-time status (less favourable treatment) : Employees and workers who work part time receive significant protection against less favourable treatment than those working full time. Yes Yes  
Training requests (in companies larger than 250): After 26 weeks continuous service, employees are able to request time off work for training or study. The training must help staff do their job better. Yes    
Published 6 October 2014