The need for a genuinely flexible labour force

Saturday 14th July 2018

frank-fieldFrank Field, Chair of the Work and Pensions Select Committee and Labour MP for Birkenhead

Arguably, one watchword for the UK’s Fourth Industrial Revolution is flexibility. Technology has facilitated all kinds of new ways of working, with the self-employed often credited with keeping our economy’s head above water, if only just.

A major problem with the current framework for employment in the UK is that it is structured so that flexibility mostly serves employers, not workers. The regulatory regime, as it stands, allows unscrupulous employers to dodge their responsibilities to both their workforce and taxpayers, by ruthlessly exploiting workers for competitive advantage, unfairly undercutting responsible businesses and undermining the country’s tax base in the process. Furthermore, they do so with relative impunity; the new employment class finds that individuals are left to take on the whole tech-facilitated gig economy, with an unacceptable burden placed on individual workers to address poor practice through an expensive and risky court case.

The Director of Labour Market Enforcement, David Metcalf, told us that with current resources, employers can expect an inspection of their labour practices once every 500 years. On that timescale, the last case would have happened before the first industrial revolution. That is hardly a great deterrent, especially when employers face only paltry fines if they are found to be breaking the law. Weak fines, restrictions on class actions and the absence of higher penalties for widespread or repeated abuses by the same employer mean companies can just sit back and wait to see whether individuals are willing to take all the risks of pursuing their rights.

In November of last year, the Work and Pensions Select Committee published a joint report with our colleagues on the BEIS Select Committee, which was accompanied by a draft bill aimed at making our employment law fit for (current) purpose. Our central proposition, a legal assumption of “worker by default – until proven otherwise”, would shift the burden and risk back where it should be, onto the employer. Companies would be required to provide basic safety net standards of rights and benefits to their workers – and rightful contributions to our welfare safety net through National Insurance and the workplace pension – or prove that their model of work is genuinely one of self-employment.

A similar approach to enforcement would push the burdens of responsibility and liability back up the supply chain, but the enforcement agencies urgently need more resources to root out bad practice. Significant increases in the fines for offending employers would create the win-win of a greater deterrent effect and additional revenues for further enforcement action. Companies that flout the law, and those that tolerate exploitation in their supply chains, should be “named and shamed”. Enabling enforcement bodies to issue punitive fines for noncompliance would also help ensure that the risks of being caught outweigh the gains companies yield from illegal pay and practices.  Concentrated “deep dives” in industry sectors and geographic areas, where there is evidence of abuse, should become a regular part of the enforcement armour to protect vulnerable low paid workers.

There can be no encroachment on the National Minimum Wage or National Living Wage, in law or practice. Workers must never be faced with a choice between not working, or working for sub-minimum pay. Workers cannot take on all the risks and none of the benefits of flexibility; companies should either guarantee hours that reflect the periods worked each week, or compensate workers for uncertainty. The law must also be clarified to protect those who want the full flexibility of genuine self-employment, to allow entrepreneurs to work in the ways that serve them best. But making flexibility work for workers means more than that. Another frontier of our Fourth Industrial Revolution must be access to work; increasing our chronically low productivity by enhancing the support and flexibility that will assist carers, parents and people living with disabilities get into, stay in and progress in work.

The vast majority of businesses have nothing to fear from our proposals. Quite the reverse – our proposals would put good businesses on a level playing field, not being undercut by bad ones.

It is time to close the loopholes which allow irresponsible companies to underpay workers, avoid taxes and free ride on our welfare system. The Government response to our report and draft Bill is now overdue; we expect it imminently, and we intend to push to see our recommendations enacted. A legal framework that enables a genuinely flexible labour force will benefit workers, consumers and businesses – but we must not allow the gig economy to burden workers and taxpayers only with the risks and associated costs of this flexibility.

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