Reflection on the Taylor Review – Impact on National Minimum Wage (NMW) in the gig economy

Fri 11 Aug 2017

HMRC, who ‘police’ the application of the NMW legislation, have up until now focused their attentions on particular sectors such as catering, hospitality, retail and charities where long hours are a characteristic feature of the business. However, increasingly they base their enquiries around complainants who are encouraged to log their claims via the gov.uk portal.

A difficulty for many employers is that the legislation requires them to maintain accurate and comprehensive records of the hours worked by their employees and this can be a particular problem for any business where fluctuating levels of custom require a fluid and responsive workforce. If the employer is unable to prove the number of hours worked by the employee, then the presumption is that the employee has worked the hours that he or she has claimed.

The ‘Gig’ economy has been much in the news this year. The case Mr Y Aslam, Mr J Farrar and Others v Uber which called into question the business model that underpins many gig technology platforms, seeks to categorise these individuals as ‘workers’ who therefore have  entitlement to certain employment rights as well as NMW.

How would you calculate working time where a worker can simply log on to an app or is available and genuinely looking for work?

The Taylor review debates the gig economy and suggests that if NMW were to apply to individuals such as many platform workers, it is important that working time is ‘sensibly’ calculated.  It suggests an adaptation of piece rates in the legislation. It states that ‘no individual should be expecting to be paid for all the time that he or she has the app open (regardless of whether or not they are seeking work). For instance, it would clearly be unreasonable if someone could log onto an app when they know there is no work and expect to be paid.’

It also suggests that a technology-based solution could also be used to ensure a fair application of NMW.

How does a piece rate work?

Digital platform based working offers opportunities for genuine two-way flexibility and the Report suggests that platforms should be able to compensate gig economy workers based on their output, ‘…provided they are able to demonstrate through the data that they have available, that an average individual, working averagely hard, successfully clears the NMW with a 20% margin of error…’ (using‘fair piece rates’).  There is also a requirement to issue a notice before the start of the pay reference period, explaining what the “mean hourly output rate” is and stating the rate of sum to be paid to the worker for the performance of the task in question.

However, the Report recommends that the Government should consider very carefully how this could be implemented to avoid abuse.

Separately, in relation to zero hour contracts and to ensure that flexibility doesn’t benefit the employer at the unreasonable expense of the worker, and that flexibility is genuinely a mutually beneficial arrangement, the Report  recommends that the Government should ask the Low Pay Commission (LPC) to consider the design and impacts of the introduction of a higher NMW rate for hours that are not guaranteed as part of the contract.

Conclusion

If individuals working in the gig economy are “workers” for the purposes of the NMW then is a new system required? Fair piece rates are already legislated for but, in our experience, are not widely used across all sectors so clearly proper enforcement is an issue here. Who will police this to ensure this is not abused – and how? It’s HMRC at present?  A technology based solution would be welcome but the Government needs to ensure that any change results in a fair system which doesn’t increase the level of administration burden on both individuals and their engagers, whilst maintaining flexibility.

The Report provides recommendations only and we would envisage the Government seeking a ‘call for evidence’ or ‘consultation’ on the some of these changes in the near future.  We’re still not clear on the Government’s urgency to address these recommendations given the on-going Brexit debate. However the Report does show that there is a need for laws to catch up with the modern way of working, resulting in a fairer system.

See our previous commentary here.