Business Advice: Will Labour ban zero-hours contracts?

Headshot Frances Lewis

If Labour wins the next election, will it ban zero-hour contracts and introduce day-one employment rights?

In an interview in February, Shadow Deputy Prime Minister Angela Rayner talked about introducing a bill “within 100 days” of an election to make major changes affecting temporary staffing, gig working and contracting, as part of its “new deal for working people”.

Changes would include day-one employment rights for all workers, a ban on zero-hours contracts and an end to ‘bogus’ self-employment. The report also mentions Labour’s intention to enhance rights and protections for those who are genuinely self-employed.

The detail is not yet clear, but these proposals are nothing new. Following Matthew Taylor’s ‘Good Work’ report in 2017 (the Taylor report), BEIS* published its intention to ‘close the loopholes that allow companies to use bogus “self-employment” status as a route to cheap labour and tax avoidance’. Some recommendations were implemented, but the more difficult question of how to tackle bogus self-employment was not.

Whatever the rights and wrongs of Labour's latest and BEIS's earlier proposals, it will be very difficult for any government to introduce quick and effective legislation to address worker status.

The challenge of eradicating 'bogus self-employment'

In the UK, employment status relies on complicated case law tests going back decades. These can be difficult to apply to modern working practices involving remote working and/or short-term assignments which evolve rapidly. Any attempt to resolve the problem with a new statutory definition or test of self-employment or employment would lead to loopholes and gaming of the system if too narrow or collateral damage if too wide.

Zero-hours

Zero-hours work takes many forms, including a lot of traditional short-term agency worker staffing arrangements like agency nurses, locum teachers and many industrial/warehouse roles, as well as classic gig workers like delivery, taxi app workers and home tutors.

Are all these business models going to be banned as currently operated? Is it really feasible for all rights to apply from day one for all types of workers, however short term or frequent their work is?

It will be complicated to legislate effectively. Again, there will need to be a lot of consultation and we doubt that effective legislation can be implemented quickly. Labour may focus only on ‘exploitative’ zero-hours arrangements and set about defining what is exploitative.

It's possible that the right to request predictable hours – likely to come into force from September 2024 – already achieves most of what the Labour Party is proposing.

Is the solution under our noses?

The Taylor report suggested supporting self-employed workers through ‘work tech’ or benefit platforms to provide access to a range of non-statutory benefits and protections, which could be accrued and retained while working for different clients or via different gig worker platforms.

A similar centralised benefit approach could be developed for zero-hours workers with licensed and properly regulated ‘employer organisations’ acting as employers of record, running their pensions, accruing holiday and benefits arrangements from day one, providing access to training and making financial services available to workers, including access to mortgage advice and vehicle finance. If this could be coupled with a statutory requirement for agencies and/or end-users to engage only with licensed operators then this would ensure that zero-hours workers get whatever employment rights the government thinks they should have and, possibly more importantly, aid collection of tax.

This is similar to what some umbrella companies already do, and we can imagine that some might welcome such a licensing arrangement, especially if it meant the ‘dodgy’ end of that market was thereby driven out of business.

Frances Lewis (pictured) is consultant for Osborne Clarke.

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