IN last year’s autumn statement George Osborne told the House of Commons: “We’re going to tackle the growth of intermediaries disguising employment as false self-employment, depriving workforces of basic employment rights like the minimum wage in a bid to avoid employer national insurance.”
This year’s Budget confirmed new tax and insurance measures we were told would deal with bogus self-employment that came into effect in April.
Any attempt to deal with the scourge of bogus self-employment is welcome. The government was too cautious and much more needs to be done.
Yet employers are attempting to circumvent even these modest new tax regulations.
Unite has received a number of disturbing reports of agencies forcing workers into so-called “umbrella payroll companies.”
The practice involves workers signing contracts with payroll companies that class them as self-employed when in practice they work for a single company taking instructions on the work they do.
Through this the agencies then seek to offload the employer and employee National Insurance contributions, as well as other benefits such as holiday pay, all to the detriment of the worker.
Reports also include workers being actively encouraged to submit fraudulent expense claims to offset the losses in income, which could clearly have long-term implications for the individuals who may face further action from Inland Revenue.
Bogus self-employment has been a particular problem in the construction sector where Unite is running a “Play by the Rules” campaign.
The construction sector has a number of national agreements covering terms and conditions and our campaign aims to ensure that all members working for companies under those agreements enjoy their full terms and conditions including direct employment.
Unite is seeking legal advice on the attempts to circumvent the new tax regulations, but while we are clear that such actions do not comply with the spirit and intent of the legislation, a legal challenge may not succeed.
That is why we are advising members to resist being pushed into payroll companies and their actions have successfully challenged deductions — of up to 25 per cent — in a number of cases and gained direct employment as a result.
Talks are under way with a number of major contractors as workers are being transferred back to direct employment and in April Unite reached an agreement with electrical contractors NG Bailey for electricians working at Three Bridges Station in Sussex to ensure they were directly employed following worker protests over attempts by the agency to set up an umbrella company.
It is this industrial response that will win for our members and Unite is calling a day of action to boost the campaign against bogus self-employment.
And this issue of bogus self-employment goes wider than the construction sector. These bad practices will spread if not dealt with comprehensively and swiftly.
Bogus self-employment has a number of serious consequences. These include lost revenue for the Exchequer with less money for our NHS and social care, the potential for market distortion and making employers less inclined to invest in safety, training and skills for the future.
Crucially for us, it is a practice that ultimately exploits workers, drives down pay and undermines national agreements.
We welcome statements from Labour that it will take action against bogus self-employment and its recognition that it undermines and undercuts “responsible employers” and any future regulation must have teeth.
There are a number of measures that need to be taken. The definition of an intermediary needs to be broad, covering payroll companies, umbrella companies, employment businesses and sub-contractors.
The definition should also anticipate future contractual devices designed to wriggle out of any legislation.
In addition, anyone subject to significant control, supervision or direction in relation to their work should be deemed to be employed for tax and employment rights purposes.
There is an urgent need for government to reform the law on employment status for the purposes of statutory employment rights.
Councils and government could and should use public procurement as a lever for direct employment in areas such as construction and to establish defined targets for apprenticeships. This does not need legislation, simply political will.
We have also called for the abolition of the Construction Industry Scheme — a tax arrangement unique to the industry, which allows firms to make flat-rate deductions for payment of income tax from self-employed contractors who are registered with the scheme — and make genuinely self-employed workers responsible for their own tax affairs.
In addition, the HMRC should also have sufficient resources to enforce compliance with tax and NI obligations.
Bogus self-employment is a scourge and a striking example of the precarious nature of today’s labour market.
It demonstrates the need for better employment protection, the benefits of direct employment and national agreements and the need for strong trade unions. Unite is at the heart of that battle.
Gail Cartmail is assistant general secretary of Unite.
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