Theresa May insisted on Tuesday that Britain must retain labour market flexibility in any response to a long-awaited, government-sponsored review into work practices in the UK.

The report by Matthew Taylor, the former Labour party official asked by the prime minister to look into workers’ rights, was met with a largely negative response from employers and unions on Tuesday

The most contentious recommendations were focused on reshaping the way companies, such as Uber and Deliveroo, operate in the so-called “gig economy”.

This includes a proposal that the government define more clearly in law when a person is classed as a worker that Mr Taylor describes as a “dependent contractor” — an intermediate status for people who are not company employees but are also not as free as independent contractors.

The report also suggested that when dependent contractors are paid by the task rather than the hour, minimum wage rules could be applied on a “piece rate” basis. Mr Taylor, Tony Blair’s former policy advisor, also proposed closing a legal loophole, known as the “Swedish derogation” that allows temporary staff from agencies to be paid less than direct employees doing the same jobs.

The report also recommended that companies which control and supervise their workers should pay a range of benefits, including National Insurance.

Mrs May cautioned Britain must avoid “overbearing regulation”, remaining “a home to innovation, new ideas and new business models”.

She said it was important to ensure that zero-hours contracts do not allow employers to “exploit” workers, but rejected Labour’s call for them to be banned, warning that this would “harm more people than it would help”.

The CBI, the employers’ lobby, reacted with dismay to one of the main proposals. “Businesses will be deeply disappointed by the stance the review team has taken on agency temps who are paid between assignments as part of the so-called ‘Swedish Derogation’. Firms are ready to look at any evidence of poor practice around these rules – but abolition is not the answer,” it said in a statement.

The lobby group added that the proposal to extend minimum wage rules to “gig” workers would make enforcement of the regime more difficult by adding a layer of complexity. “Such a change may have the unintended consequence of encouraging the creation of a large number of fixed, short-hour jobs, leading to fewer people getting the work that they want,” the CBI said.

Manufacturers also gave a lukewarm response to the report. Its lobby group, the EEF said: “Industry will welcome the recognition that flexible ways of working are necessary to protect the UK labour market and can be mutually beneficial for both employers and individuals.”

But it added: “There is however little evidence in our sector that the current regulations are either not working or in need of change, and any reduction in flexibility will harm UK businesses in the challenging circumstances they face.”

The unions were equally dismissive of the report. Frances O’Grady, general secretary of the TUC said: “It’s no secret that we wanted this review to be bolder. This is not the game-changer needed to end insecurity at work.” She added: “A ‘right to request’ guaranteed hours is no right at all for many workers trapped on zero-hours contracts.”

But Ms O’Grady did welcome the report’s call for equal pay for agency staff and sick leave for low-paid workers and she called on the government to “move swiftly to implement these recommendations.”

Sam Smethers, head of women’s rights campaign group Fawcett Society, said enforcement of the proposed reforms would be key.

“Improving access to maternity, parental leave and sickness benefits for those currently not covered is welcome but without enforcement it won’t deliver,” she said. “Tightening regulations isn’t red tape. Rather it is fair to responsible employers who play by the rules.”

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