ANYONE walking past Parliament in the week the Labour leadership candidates faced off in a televised debate would have seen hundreds of workers protesting against legislation set to make them poorer.

A familiar sight in these times. However, the more observant would have noticed the absence of any trade union paraphernalia. Missing were the usual assortment of paper-sellers, flag wavers or other labour movement conventions.

The contentious legislation drew no attention from the Labour leadership contenders hoping to instal themselves in that place, little attention from the wider trade union movement and almost total silence from much of the left. 

The workers demonstrating were contractors protesting against the introduction of anti-avoidance tax legislation “IR35” contained in the 2017 Finance Bill, due to come into effect this April. 

IR35 is ostensibly aimed at recovering tax at the appropriate rate from what the HM Revenue and Customs has designated “disguised employment” – individual contractors employed through a system whereby they have set up as a limited “personal service company” providing a service of “labour” rather than having a contract of employment.

In such cases, workers employed in this way only pay corporate tax rather than income tax and national insurance contributions, but are not legally regarded as a “worker,” forfeiting all legal protections and statutory employment rights. 

IR35 shifts the onus from individual contractors to nearly all employers for assessing the employment (tax) status of all “off-payroll” workers hired and making them liable for the employer’s national insurance contributions they have so far avoided.

Personal service company contractors will now be taxed the same as directly employed workers, in some cases they will also be liable for paying the employers’ national insurance contributions too, but, crucially, without any legal or statutory employment rights.

The incoming legislation is thought to affect as many as 200,000 workers.

At the top end of the market in labour contracted through personal service companies are highly skilled specialists who often work nationally as genuine temporary/freelance contractors for whom direct employment is unsuitable. But that does not mean such individuals should be bereft of basic workers’ rights or have to face a financial penalty.

At the mid level of the market, skilled workers, in addition to the sudden financial impact, face a sudden shift in employment practices by employers seeking to protect themselves from the incoming legislation.

At the lower end of the market, unskilled and semi-skilled workers such as transport cleaners find themselves hopelessly exploited carrying out permanent work functions at the bosses’ whim.

Nearly all personal service company contractors use one of the myriad of umbrella companies, often a subsidiary or holding of the company contracting them, to handle their tax and pay arrangements mediating between them and their employers. 

The umbrella company bosses are lining up at the trough, seeking to use the disruption arising from the incoming legislation to expand.

Many workers have been lured away from direct employment into what is in effect “no-rights employment” by the offer of relatively higher wages and lower contributions, trading away their rights to do so.

According to the TUC, as many as 3.3 million workers are now employed via various schemes, ranging from outsourcing to personal service company – which contracting bosses use to avoid risk associated with employment and their responsibilities to the people who deliver their profits.

A web of lobbyists promote “no-rights employment” to the bosses – openly boasting that employers have no need to worry about trade unions, having a diverse workforce or employing “maternity-risk” young women. 

Forget about tribunals – you can hire and fire at will. Forget about employee rights of any kind or sick pay, maternity pay, holiday pay our any other inconvenience.

The trade union movement has long argued that companies should be responsible for setting the employment terms within their supply chains – and should have a joint legal liability with their labour suppliers to protect workers’ rights.

This has been dismissed by government and industry on the basis that, where a company contracts out, the responsibility for the conditions overseen by contractors are the responsibility of the contractors alone.

Trade unions have long argued that workers are workers regardless of whatever contractual sleight of hand is used to engage them. This argument too has been dismissed by government and industry.

Yet the government now recognises that all types of contractors are employees and it will tax them as such. Now it suits them, they also concede the principle that companies have a legal responsibility for their supply chains.

The new Chancellor of the Exchequer, Rishi Sunak, admitted recently in a public speech defending IR35: “Some people were operating in the way that they weren’t paying the tax that they probably should have been, essentially they were employees and were being taxed as if they were self-employed.”

Clearly then we have an opportunity to put the case clearly for workers’ rights – no taxation without representation. No taxation of contractors as if they’re directly employed workers without the corresponding statutory rights and protections.

If companies are responsibility for setting the tax status of workers in their supply chains then they must be jointly liable for the employment rights for them too.

Meanwhile the case has to be put for the Labour Party to undertake a careful consideration of the labour market, in co-ordination with the trade unions, to develop policy positions in tune with the reality of contracting that go beyond simplistic repetitions of the “no to zero-hours contracts” mantra.

Labour leadership candidates need to be held to the manifesto pledge on sectoral collective bargaining. We need to build on it with strong industrial policies such as mandatory trade union inclusion in labour supply planning for all major infrastructure projects.

In the trade unions we need to refocus towards organising on industrial lines to tackle the complex problems thrown up by the contracted-out labour market – an example is in RMT, where we have prioritised seeking agreements that cover supply chains including contacting out from top to bottom in the coming period.

We need to pool our expertise to offer membership solutions for this difficult market and democratic forums to bring the voices of contracted-out workers into the decision-making structures of our movement.  

We will risk missing such opportunities in the cut and thrust of divisive political debate – if we are not industrial we have no business playing at being political.