The long-awaited Taylor Review of Modern Working Practices was officially published last week, putting forward recommendations for the self-employed, including an auto-enrolment pension scheme, and a new ‘dependent contractor’ definition.
Theresa May appointed Matthew Taylor, Head of the RSA, to chair a report into the employment practices of the self-employed. An inquiry report by the Work and Pensions Parliamentary Committee recently recognised that, “it is clear that current ways of categorising workers are creaking under the weight of the changing economy.”
The report which analyses the labour market and platform based business models, such as the one followed by Uber, attempts to recommend measures to improve quality of work, and the flexibility that self-employment brings.
Taylor’s team have developed the term ‘dependent contractor,’ which proposes to replace the current term ‘worker’. This is to create a clearer boundary between the genuinely self-employed and dependent contractors (workers).
A worker, or ‘dependent contractor’, is not an employee, or self-employed professional – it’s somebody who adopts a casual form of working. Taylor says in the report,
“The status of ‘dependent contractor’ should have a clearer definition which better reflects the reality of modern working arrangements, properly capturing those more casual employment relationships that are on the increase today – an individual who is not an employee, but neither are they genuinely self-employed.”
This report calls for a fairer relationship between the worker and firm, making it easier to differentiate dependent contractors from the genuinely self-employed. Taylor proposes that Dependent Contractors should be entitled to rights such as sick pay, and holiday pay.
Auto-Enrolment Pension Scheme
A recent report conducted by IPSE, Association of Independent Professionals and the Self-Employed, recently found that 37% of IPSE members do not have a pension, while 16% don’t save for retirement at all. This contributes to growing concerns that the self-employed could be left under-pensioned when hitting retirement.
Taylor calls on Government to explore auto-enrolment for the self-employed in order to help them save for retirement “which could generate a step change in the way that self-employed people save for their future.”
Prior to the release of the Taylor Report, and shortly after the Government confirmed plans to provide an auto-enrolment scheme for the self-employed, Royal London and Aviva published in depth plans into how the scheme would work.
Steve Webb, former pensions minister, said, “The self-employed would have a suggested 4 per cent net (plus tax relief from the government) added to their tax calculation.”
It was proposed that the annual tax return would be used to default the self-employed into making pension savings.
Matthew Taylor proposes that employers will be required to prove that their workers are able to earn above the minimum wage, in order to keep pace with competitive business models and to implement a form of protection for gig-economy workers.
The recommendations made in the Taylor report will be up for discussion in the House of Commons, but Theresa May will need cross-party support to enforce what she decides to put forward to MPs.
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