Matthew Taylor: Change tax system to stop exploitation in gig economy

Image: RSA

Any expectation that the recent Supreme Court ruling against Uber will put an end to the mistreatment of vulnerable workers in the gig economy is wrong, according to Matthew Taylor. Instead, legislation is necessary to stop businesses circumventing the payment of employer’s national insurance.

Taylor, who in 2017 published a series recommendations that would improve working practices in the UK, tells the Oven-Ready HR Podcast that the UK government should “move to a situation where we don’t tax labour differently depending on who provides it”.

We are relying on the courts to do work that ought to be done by legislators. And the problem with the courts is that they are only making a judgment on the case that is put in front of them” – Matthew Taylor

He says: “There is no justification for employers having to pay more tax on the labour of people they employ, than the tax they pay on labour of people who they hire but don’t employ.

“If [they were aligned] then you’d make the system much simpler and you’d reduce significantly the incentives of bogus self-employment.”

He suggests that the rules around tax and employment status complement each other. “Under tax law there are only two statuses – self-employed and employed – but in employment law there are three statuses – employee, limb (b) worker, and self-employed. I would only have two categories and I’d have the line that separates people in tax terms exactly the same line as in employment terms.”

Firms circumventing the rules

In his interview with the Oven-Ready HR Podcast, Taylor notes that the rights afforded to employees under UK legislation are substantial, which means unscrupulous organisations seek to circumvent them by false self-employment.

Although many had hoped the Supreme Court’s ruling in Uber BV vs Aslam would clear up confusion around when workers’ rights should apply, Taylor says the judgment is not as far-reaching as expected because it only applies to the people who brought the case or, in principle, those who work in exactly the same circumstances.

He says: “We are relying on the courts to do work that ought to be done by legislators. And the problem with the courts is that they are only making a judgment on the case that is put in front of them. They’re changing the case law, but they’re not changing the law.”

‘Outbid’ by rivals

Taylor, currently chief executive of the Royal Society of the Arts, Manufactures and Commerce (RSA) but who in the summer takes the reins at the NHS Confederation, observes that the legal grey areas result in businesses being “outbid” by rivals that use casual work and zero-hours contracts in an attempt to minimise costs.

“The problem is when you’re in a highly competitive market like retail and somebody comes along and says ‘Hey, you don’t need to pay national insurance and you don’t need to have people standing around in the morning when things aren’t quite so busy – why don’t you move to more casual ways of working or a gig platform?’ it’s very tempting – particularly if the company down the road is doing it and you’re losing business to them,” he says.

“That’s why you need regulation and why most businesses recognise regulation is a good thing for them. They want to compete on investment, entrepreneurship, innovation – they don’t want to compete on the capacity to arbitrage a broken system.”

Good Work Plan

Asked about the delays in introducing employment reforms under the government’s Good Work Plan, which was presented in 2019, Taylor says the government is still “ostensibly committed to the Good Work agenda”.

However, he notes that there has been an “eerie silence” in relation to its intentions for the employment bill, and says it was “peculiar” that the business secretary announced, and subsequently withdrew, plans for a consultation on workers’ rights reforms.

He puts the delays down to “a combination of ideological ambivalence, inertia and a lack of any kind of independence in the Cabinet”, as well as Brexit and the Covid-19 crisis.

Earlier this year, Taylor’s contract as the government’s interim director of labour market enforcement came to an end and the government decided not to replace him. He claims that his offer to continue in the role unpaid until a successor is in place was turned down, which “just adds to people’s concerns” that the government is not prioritising employment reforms.

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