The labor market is an extremely large and flexible area that needs state control and regulation. This is explained by the fact that workers are often in a vulnerable and unprotected position. This is partly due to the impossibility or inability to correctly understand one’s status of employment of individuals, which is the reason for ignorance of one’s labor rights. It is necessary to analyze how Matthew Taylor approaches this issue, as well as to consider what improvement of legislation in this area is possible.
Changes in the public sector IR35 are not effective enough to encourage workers to interact with microbusiness and self-identify. Taylor’s review states that the most important priority should be to bring clarity to the definition of the employment status of both self-employed and employees (Daniels, 2019). The current situation is aggravated by the fact that among the large number of norms and laws, the essence of the status of employment is lost, which leads to insufficient knowledge in this area among individuals. In turn, this led to confusion over the status of the IR35 by a large number of British contractors (Bertolini, 2020). Taylor’s report states; “For individuals, not knowing your employment status means not knowing what labor rights you deserve” (Good work, 2017, p. 34). The situation should not be so complicated, since it directly affects the interests of citizens, whom the state is obliged to protect.
To simplify the determination of employment status, it is necessary to clarify the legislation. The Taylor Review emphasizes that “statuses of employment should be clear and should not be subject to broad interpretation or be so ambiguous that only a court can fully understand the underlying principles” (Good work, 2017, p. 59). It highlights the need to include in legislation certain factors that the government currently uses in determining employment status. This includes:
- Personal service (whether a person needs to do the work himself);
- Control (the level of a person’s autonomy in relation to their work) (Whiting and Martin, 2020);
- Mutual obligations (whether there is a perceived obligation to maintain a relationship).
These are the same criteria used to determine IR35 status, so collaborative thinking across the board is needed to ensure accurate employment status decisions for contractors. To avoid conflict with the IR35 definitions, the status criteria should preclude a broad interpretation of current legislation (Heyes and Rychly, 2021). Updating legislation to address these three key factors while harmonizing employment status legislation and tax status legislation could eventually be a step towards more simplified rules. Over time, this could spell the end of IR35, paving the way for unified legislation that simultaneously defines both tax liability and labor rights for workers (Cranmer, 2018). Taylor’s review calls on the government to develop a free online tool similar to the Employment Status Indicator Tool for Taxation. This method is really effective, since for citizens it is a significant simplification of the entire process, both in legal terms and in the context of time.
As the lines around what is legally considered a self-employed worker and an employee remain blurred, some contractors are incorrectly recognized as belonging to IR35, especially in the public sector. Given that employees are required to pay income tax, the Taylor Review notes that they should enjoy similar protections and rights (Williams and Horodnic, 2019). “Ultimately, if it looks and feels like a job, it should have employment status and protection,” the review said (Good work, 2017, p. 71). If, as a contractor, an individual falls under IR35 and is forced to pay a similar rate of tax to employees, then they should be given similar privileges and protection. Currently, workers working “inside” IR35 often find themselves in limbo, unable to take full advantage of the financial benefits of working for themselves and not being rewarded for the risks they take (Williams and Horodnic, 2019). At the same time, such people work without the rights that employees receive, which is a serious violation.
It is necessary to set the vector for the development of legislation towards greater protection of those who work in accordance with the rules of employment. This will not only level the playing field for contractors within IR35, but limit the actions of employers who unfairly benefit from the use of workers (Minocha and Hristov, 2018). Given the growth of the “giant economy” and the growing number of workers such as Uber drivers and Deliveroo riders, The Taylor Review coined the term “dependent contractor” (Williams, 2020). Because “dependent contractors” work between employment and self-employment, they must be able to enjoy labor rights (Harris and Block, 2021). It could then be assumed that the tax status should follow this example, and contractors working under IR35 should be treated as “dependent contractors” and be able to receive a number of employee benefits.
Thus, Uber drivers have acquired labor rights. According to Webster (2021), the UK Supreme Court on February 19 rejected Uber’s latest appeal against a labor court decision and thus ordered the company to classify taxi drivers as workers. This is not the first, but a landmark precedent that can start the process of transforming labor relations in the gig economy. The rejection of Uber’s appeal is due to the fact that the company satisfies the conditions of the platform business. According to the Tang and Wirtz (2022) platform, companies can be considered companies that meet at least two of the five criteria: if the application determines the employee’s salary level; controls the execution of work in the process; limits the right to choose working hours; determines the appearance of the employee and establishes rules of conduct with clients; restricts an employee’s ability to build their client base or work for someone else.
It is noteworthy that the court ordered Uber to recognize taxi drivers not as employees, but as workers, as a result of which Uber taxi drivers received not a complete set of employee rights but a truncated version. Among the acquired labor rights are the right to a minimum wage and annual leave, rest breaks, and control of working hours. Taxi drivers cannot demand payment upon dismissal due to staff reduction and challenge unfair dismissal. However, the acquisition of some fundamental rights by Uber drivers is a significant achievement.
Conversely, concerning Deliveroo’s deliveries, the Supreme Court has ruled that drivers are not treated as workers, implying a denial of labor rights. According to Timko and van Melik (2021), the stumbling block lay in the specifics of service delivery, including in-person or substitution. Deliveroo’s deliveries failed to acquire labor rights. Therefore, in the Uber and Deliveroo cases, personal service was a key consideration in whether an appeal was granted or denied.
Among other things, it should be noted that one of the urgent problems is the improvement of tax law, which has a detrimental effect on those who are incorrectly classified as employed. Taylor’s review makes the case for balancing the tax system, stating that the current situation “is not justified or sustainable, nor is it conducive to the goal of good labor economics” (Good work, 2017, p. 37) What the Taylor Review fails to highlight is the added risk contractors and self-employed workers take on, not to mention the lack of employee-like rights and benefits (Williams, 2020). From vacation and sick days to employers’ pension contributions, freelancers, contractors and the self-employed don’t enjoy the same benefits as employees. After all this analysis, the call for a balanced tax system seems ineffective (Carby-Hall and Méndez, 2020). The review calls for a rebalancing of the tax system over time and for the self-employed and employed to pay the same tax rates.
This initiative could spiral out of control, deterring many businesses from engaging with real freelancers and contractors, while depriving the self-employed of an element of independence. The main advantage of a freelance or contractual arrangement is that the employee and company benefit from a temporary, flexible working relationship. The report concludes that employment status and its subsequent scope are too confusing for the average person to decipher without the help of the courts (Sargeant and Lewis, 2018). It is proposed to develop a clear set of laws to help workers and employers easily establish employment status and associated labor rights. Taylor’s review states, “…the rights of people with each status are difficult to understand…may be missing out on key rights such as vacation pay” (Good work, 2017, p. 110). It was highlighted that many workers and employers believe that someone’s employment status is based on the words in their employment contract (Williams, 2020). However, employment status is actually established according to certain criteria, so while an employment contract may grant one employment status, a court may decide that an individual actually has a different status.
Recent cases have shown the ease and frequency of exploitation of workers in the gig economy. Companies such as Uber, Deliveroo and Sports Direct have been involved in major lawsuits to expose the extent of the general misunderstanding of the rights of those who work flexible hours (Tinsley, 2021). To distinguish between employees and workers, the review suggests referring to workers as dependent contractors instead (Pichault and Semenza, 2019). Taylor recommended that people continue to be able to work at their convenience, but the government should work to provide greater protection for workers without depriving them of flexibility in their work (Cabrielli, 2020). He suggests that the success of the current job market may be due to more women and older people getting jobs because of the flexibility this type of work offers. For this reason, the review seeks to persuade the government to allow such work to continue (Garden and Bales, 2019). On the other hand, they were concerned that the current pay practices left many with uncertain incomes, leading to these people struggling to get approved for mortgages and even phone contracts.
The review contains one recommendation that applies to everyone, regardless of employment status; everyone should have a “basic level of protection”. The three-tier approach should be retained, but minimum rights for each layer should be established and respected. The balance of power between employer and employee must be changed to ensure a “good job” for everyone (Schippers and Conen, 2019). There must be a fair balance of rights and obligations in order to benefit both the employee and the employer equally (Pichault and Semenza, 2019). Finally, Taylor proposed tougher penalties for businesses that seem to exploit workers, but suggested incentives for businesses that provide high-quality jobs.
Reference List
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