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Changing Employment Models For a Changing World

on Monday, 23 October 2017.

From Servant to Self-Employed. The Labour Market in the UK continues to evolve.

By 2025, it is expected that millennials (those born between 1980 and 1999) will form 75% of the global workforce and it is impossible to miss the press reports on the challenges to traditional employment models arising out of the 'gig' economy. So are traditional employment models still fit for purpose?

The relationship between employer and employee is fundamentally based on a contractual agreement but as the master/servant relationship has evolved and to address imbalances in negotiating power,  statutory protections have been applied both under national and EU law. These provide a framework of minimum protections which cover a range of terms, including benefits (e.g. minimum wage; sick pay and holiday entitlement), job certainty (e.g. protection against unfair dismissal, the right to return to work after maternity leave and protection on a TUPE transfer) and societal fairness (e.g. discrimination legislation; equal pay and the right to ask to work flexibly). However as workforce expectations change and businesses look for alternative platforms to provide services what can or should be done to regulation of this changing relationship?

These questions led the Government to commission a review into modern working practices by Matthew Taylor, Chief Executive of the Royal Society for the encouragement of Arts, Manufacture and Commerce. The report was published in July 2017 and recommends a number of changes, but it does also highlight the strengths of the UK's existing labour market.  The goal, which many charities will no doubt agree with in principle, is to create better jobs and the report calls on the Government to adopt the ambition that all work should be 'fair and decent' with scope for fulfilment and development.

The Report Sets Out Seven Key Policy Principles for 'Fair and Decent Work':

  1. The UK should aim for 'good work' for all, which includes a fair balance of rights and responsibilities for employer and individual, with baseline protection for all individuals, while allowing an ability to adapt to innovation and technological change. Consistent taxation is also key to this concept of 'good work'.
  2. Genuine two-way flexibility offered by platform-based working should be protected whilst ensuring fairness for those who work through platforms.
  3. The law should help employers to make the right choices and help individuals to know and exercise their rights.
  4. The best way to achieve better work is responsible corporate governance, good management and strong employee relations.
  5. Everyone should have attainable ways to develop and strengthen their work prospects.
  6. We should develop a more proactive approach to workplace health.
  7. Individuals must not become stuck at the living wage minimum or face insecurity.

Charities will frequently share these aims and much of the perceived exploitation of workers has occurred in the commercial sector where the courts have criticised employers such as Uber and Deliveroo for wrongly classifying drivers or riders as 'self-employed' instead of 'workers', thereby depriving them of significant statutory protections e.g. the right to holiday pay.

However, there is pressure on many charities whose funding is limited to seek best value for the money they expend on their workforce. A charity's values might pre-dispose it to fair employment practices, but if commercial organisations are prepared to exploit legal loopholes in the pursuit of profit, they can gain a competitive advantage by undercutting the costs of services offered by those in the third sector, resulting in further losses to charities.

In this context, therefore, the recommendations of the Taylor Review should be welcomed by many charities. If the Government acts to implement the recommendations of the report, the results will not only be a healthier and more engaged workforce, but also a more level playing field. So does that mean that charities can sit back and wait for legislative change?

Engaging Millennials

With the number of millennials exceeding not only the numbers of economically active 'generation X' workers  but also those in the 'baby boom' generation then regardless of regulatory change, any HR strategy does need to consider the very different expectations of  this key pool of workers. A number of surveys have been undertaken to assess attitudes to work of graduates (including by Deloittes and PWC) and whilst individual expectations will of course vary, some key trends in expectations can be identified.

Encouragingly, there is a noticeable preference for working 'with a sense of purpose' and millennials are more likely to join an organisation that shares their values (whether in the corporate, public or third sector). Charities should stress the social benefit and shared values that they can offer as organisations to attract and retain strong candidates.

However, never having known life without the internet, broadband, smartphones and social media millennials understandably expect instant access to information, a high level of interaction on a number of different media streams, (although often with a reluctance to use 'face-time') and many expect to use their own devices. Antiquated IT systems and restrictive policies on use of e-mail/social media/personal smartphones can act as a significant disincentive.

Flexible working practices are also important to them, not just in relation to reduced hours but also the offer of variable start and finish times and work at different locations including home based working.

The drive for flexible working may be driven by demand from employees for work-life balance and/or by the employer's need to reduce fixed costs in many organisations but it is valued and as commercial organisations increase the flexibility offered whether by alternative employment models or in terms of work-time and location, charities need to consider how flexible working practices can be integrated into efficient operational and service delivery. Where flexible working operates successfully based on trust between employer, employees working in a traditional pattern and those working flexibly, it can assist with attracting and retaining staff and also enhance a feeling of accountability not only for the individual's personal performance, but for the organisation as a whole.

However, despite their desire for flexibility, millennials demonstrate a somewhat surprising need for structure, clear objectives, regular positive feedback and transparent career progression. It is therefore important that clear management structures and processes remain in place as working practices change.

So are there sustainable alternatives to paid employment?

Whilst many charities are not affected by the gig economy, reports suggest that the number of volunteers has increased significantly over the past 18 months and charities are well placed to capitalise on the increasing willingness of society to give up its time, without pay, to contribute labour. Volunteers may work for organisations on a voluntary basis for a short time, to gain experience, but in the charity sector volunteers, if well-managed and offered interesting and engaging experiences, may be prepared to stay for long periods and some charities report that volunteers have become a fundamental part of their on-going business model. Millennials who value the feeling of contributing and who may well be able to vary working hours to accommodate volunteer working are perhaps under-utilised by many charities.

If charities do engage volunteers, they should remember that volunteers not only must not be paid but that they cannot be provided with benefits in kind. The only payment a charity can make to a volunteer is reimbursement for out of pocket expenditure. Whilst it is important to ensure that volunteers are adequately trained and have a proper induction program, the training provided should not go beyond the skills needed in the volunteer role as otherwise even excessive training could be considered to be a benefit.

If payments (other than expenses)  are made or benefits provided, then HMRC is entitled to treat the volunteer as a 'worker' and this could have serious consequences for a charity which may not only have to pay the volunteer national minimum wage, but may also be liable for penalties.

Although cases heard to date have preserved the status of volunteer and dis-applied statutory protection, the recent findings of the courts in the Uber, Deliveroo and other similar cases that those allegedly 'self-employed' in the gig economy are in fact workers may encourage further claims from disgruntled volunteers for certain statutory protections.

It is therefore advisable to ensure that there is a written agreement in place setting out the expectations of both parties and specifying what if any expenses are recoverable by the volunteer, but ensure no benefits are provided or obligations placed on the volunteer in order to avoid the risk of creating an employment relationship. 

The world of work is changing and way that charities respond to the challenges facing them, whether or not the recommendations of the Taylor report are implemented, will be a key factor in their ability to succeed.

For more information, please contact Kathy Haliday on 0121 227 3711 or Lorna Scully in our Charity Law team on 0121 227 3719.

From inter alia Deloittes 2016 Millennial Survey



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