Posts Tagged ‘Economy and Society’

The government just proposed the biggest cut to worker rights since 1986 and must be opposed

With the government having recently announced plans to introduce ‘rolled-up holiday pay’, Ewan McGaughey explains what this mechanism is and why it must be opposed.

Happy New Year from the Conservative Party. In a new ‘Good Work’ plan, just before Christmas, the government announced an intention to make the biggest cut to individual worker rights since 1986. This follows the recommendations of the now notorious Taylor Review. At the centre is a little understood pledge to give workers “the opportunity to receive rolled-up holiday pay”. The effect will be that employers can scrap paid holidays – like Christmas or New Year’s Day – completely. This is utterly unlawful in international law and EU law and must be opposed.

What is rolled-up holiday pay? Instead of ensuring you take ‘at least four weeks’ or 28 days off a year (in addition to your normal weekends) and paying you for them, an employer gives you an entry in your pay slip that says you get, say, 13% extra pay on your wage. You may well ask, what’s wrong with that? Just imagine a corporate employer that wants to save money. Employers put a new entry in the pay-slip of an extra 13% pay instead of giving you paid holidays. But then they reduce the wage by the supposed amount of rolled-up pay for everyone who earns above the minimum-living wage. Pretty soon every unscrupulous employer has scrapped paid holidays. Employers will not raise wages (as if the real world follows an abstract model of perfect commodity markets) because workers systematically lack bargaining strength: they are not ‘equals in power’. As Adam Smith knew in 1776, in a world of gross disparities in wealth and income, the employer can always ‘hold out’ longer.

When the UK introduced the statutory right to paid holidays, after it was enacted by the EU, it failed to stop rolled-up pay. So in 2006 the Court of Justice of the European Union was forced to rule in Robinson-Steele v RD Retail Services Ltd that the Working Time Directive ‘precludes the payment for minimum annual leave’ being ‘paid together with the remuneration for work done’ because the law must ensure ‘the worker actually takes leave’. The point of the law – a fundamental right in the Universal Declaration of Human Rights, which the UK has signed up to – is that people really have paid holidays.

So why is the government proposing to violate international law, EU law, and potentially destroy paid holidays for millions of British workers? The answer may well be that it doesn’t understand what it’s proposed because it had followed the equally uninformed Taylor Review. Chaired by Matthew Taylor, a former advisor to Tony Blair, this made the same proposal as part of a broader enquiry into problems of work in the so called gig economy. While failing to draw upon any credible legal expertise, it lauded Estonia for ‘working with Uber’ to reform its tax code. The Review was revealed to be tainted by serious conflicts of interest: a review member called Greg Marsh held shares in Deliveroo (another app corporation that Uber is reportedly trying to buy), and failed to publicly disclose this until exposed by the Financial Times.

The ‘upside’ is that the government may be proposing less swingeing cuts than Taylor: only for a new class of ‘dependent contractor’ and not for ‘employees’. In UK law, most people with a job are employees, with rights to job security, to leave to care for children, and covered by employer contributions for National Insurance. Then, there is a larger group of ‘workers’ who must get the minimum wage, paid holidays, and be auto-enrolled in a basic workplace pension. Our courts still have not quite settled who is in each group, and the worst employers continue to exploit the lack of enforcement to evade social rights. In essence, the government seems to be saying that only non-employee workers (which it wants to rename as dependent contractors) lose the right to actual holidays.

The Supreme Court’s leading judgments strongly suggest that everyone whose work is controlled, who personally performs work, and who lacks bargaining power is an employee. Only people with real autonomy, like a law firm partner, or a highly paid plumber, will be non-employee workers. But conflicting judgments have often left those who lack the bargaining power to get fair terms of work – casual waiters, agency workers, and Deliveroo cyclists (this is being appealed) – out of the scope of employee protection. The government also proposes legislation that risks entrenching the worst judgments with very little thought (p. 44). By contrast, the Labour Party is proposing – following the Manifesto for Labour Law – that every worker has all rights from day one. The imperative of international law is that “everyone” has the right to fair pay, leisure, equality and security – not just some people, as Uber, Deliveroo, or others would have it.

Whatever way one views it, the government’s proposals threaten the worst cuts to individual workers’ rights since 1986. This cannot be what is intended by any plan called ‘Good Work’. Worse cuts have been made to union and collective rights, which have destroyed Britain’s status as a fair wage economy, accelerated inequality, and brought with it billionaire backed far-right extremism. But among individual rights, this is even worse than David Cameron’s assault on the right to a fair hearing at an Employment Tribunal, or eliminating the right to fairness in dismissal until after two years, or forcing people at Jobcentres onto zero hour contracts and into unpaid Poundland labour. Even despite the thousand cuts since 2010, this is the most malevolent proposal since Margaret Thatcher’s abolition of the fair wage councils in 1986.

Admittedly, Brexit would likely prove to be far worse for workers’ rights, because people lose the right to work in EU countries, the protection from rising EU rights, and a voice in shaping international labour standards. The Tories would probably not be proposing rolled up holiday pay if Brexit was not still a real possibility: any such law would be swiftly injuncted (and may still be unless there is ‘no deal’). But the proposal to destroy paid holidays for millions of workers is immediate, cruel and grave. Fundamentally, the UK needs to rewrite its labour laws from scratch, with a new Code of Labour Rights that includes fair pay through sectoral bargaining, a revived Ministry of Labour that guarantees full employment, an end to the gender pay gap by reforming our sexist childcare laws, and the right to vote for company boardrooms and on major workplace policies. We also should start moving to a three day weekend, and fulfil our commitment in 1961 to ensure the working week is “progressively reduced”. When we do, people will be more free to pursue all of the valuable things in life: time with family, arts, sport, philosophy, or community participation. But in the meantime, this rotten New Year surprise must be opposed.


Note: the above draws on the author’s article published in Industrial Law Journal.

About the Author

Ewan McGaughey (@ewanmcg) teaches labour law at King’s College, London.





All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

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