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How new worker protections will impact contractors

John Hayes

New measures designed to protect agency and zero-hours workers could pose problems for both construction firms and their operatives, John Hayes explains.

The government recently unveiled a new package of workplace reforms in its latest response to the Matthew Taylor review of UK working practices.

These reforms are intended to offer protection to agency workers, zero-hours workers and others with atypical working arrangements. They will, undoubtedly, affect many operating in the construction sector.

What are the new workplace reforms?

The proposals take forward 51 of the 53 recommendations made by Taylor in July 2017. The government’s stated aim in announcing these reforms is to ensure workers can access “fair and decent work”, while giving businesses greater clarity on their obligations. The government has not, however, committed to a timetable for most of these measures.

The key proposals include:

  • Giving all workers the ability to request a more predictable and stable working pattern after six months of work.
  • Larger fines for employers who have shown malice, spite or gross oversight in breaching employment rights (an increase in the maximum fine payable from £5,000 to £20,000).
  • The right to receive a statement of rights setting out a worker’s entitlements in relation to pay and annual leave from day one in a new job.
  • The Swedish Derogation in the Agency Workers Regulations 2010 (which allows employment agencies to avoid the equal pay provisions of the Agency Workers Regulations 2010 by employing workers directly and paying them between assignments) will be repealed.
  • Plans to introduce a new enforcement body to ensure workers’ rights are properly enforced are to be brought forward.
  • Changes will also be made to ensure workers are not financially penalised for taking annual leave.
  • A clarification on the test of employment status – ideally eliminating the difference between employment law and tax liability tests (this will be crucial for CIS workers).

Impact on contractors

While the government is right to recognise that certain workers (eg gig economy workers) need greater protection, it’s imperative that these new reforms do not impact those workers who do not want them.

Many operatives in the construction sector benefit from the more flexible ways of working that have become increasingly prevalent over recent years. Businesses can work in a way that is reactive to market demands and workers can provide their services in a way that fits their lifestyle and needs.

The majority of those working on a self-employed basis within the construction sector actively choose to do so because they value the flexibility of being their own boss. 

“Repealing the Swedish Derogation is likely to have a significant impact on the industry”

Amending employment status rules as proposed may risk making the law less flexible in adapting to newer forms of work in the future. Given the prevalence of CIS workers in the construction industry, this will be the single most important development to the new proposals.

In practical terms, issuing all workers with statements of their rights on day one is likely to pose a significant administrative burden for businesses. Careful consideration will also need to be given to how businesses deal with requests from those engaged on zero-hours contracts to move to more stable and regular patterns of work after six months.

Repealing the Swedish Derogation is likely to have a significant impact on the industry. Employment agencies relying on the derogation to reduce temporary labour costs will no longer be able to do so and will need to review and update contractual arrangements currently in place with clients and agency workers.

The issue of holiday pay is also likely to be key. Construction businesses and employment agencies should ensure their workers are receiving their full annual leave entitlement and are not disincentivised from taking annual leave in any way, or face enforcement action.

The government has not yet committed to a timetable for these reforms and, given the ongoing Brexit uncertainty, it is not clear just how far up the government’s agenda they actually are.

John Hayes is managing partner at Constantine Law

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