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Are worker's rights under threat from government legislation

Are worker’s rights under threat from government legislation?

Constant wrangling over off-payroll legislation and Brexit have raised questions about the rights of UK workers. Although several documents have addressed the issue of rights, the government have yet to fully consider this angle. Like all workers, contractors need to be treated fairly for the service they provide. However, government legislation is often responsible for complicating this issue, and failing to address the disparities that arise.

Last year, the Good Work Plan highlighted the much-needed alignment of employment rights and tax. As a result of IR35 tax reforms, many contractors were left in a situation that classed them as ‘employed for tax purposes’, which meant that they were taxed the same as employees, while receiving no entitlement to commensurate employment benefits, such as sickness and holiday pay.

While this placed contractors at an obvious and unfair disadvantage, failure to address the issue has meant that many contractors have been forced to accept the situation. In many other contexts, where the actions of legislators place a minority of people at an unfair disadvantage, this would rightly be seen as a form of exploitation.

A recent landmark case saw contractor Susan Winchester claw back £4,200 from HMRC in unpaid holiday pay under the Agency Worker’s Regulations. While changes in IR35 legislation had forced her onto a payroll arrangement, the marketing professional was given no opportunity to challenge the decision, while her holiday entitlement rights were overlooked. Backed by IPSE, the contractor reached an out of court settlement with HMRC, which signals an important win for principles.

Winchester stated: “For me, the case was never about money, it was about what’s right and wrong and not being bullied into a position because of a flawed tax law.” IPSE CEO Chris Bryce echoed these sentiments, while also expressing his concern over the planned introduction of flawed IR35 reforms into the private sector: “If HMRC don’t understand their obligations under a system they’ve created, how can they expect businesses to get it right?”

Many public sector contractors have been put in compromised situations since the reforms were introduced last April. In Winchester’s case, someone made the decision to change her employment status without ever consulting her, which meant she could no longer work through her own company. Her recruitment agency then passed her details on to their preferred umbrella – without notifying her – who claimed that her holiday pay had been ‘rolled up’ into her daily allowance.

The case highlights just how vulnerable contractors are when it comes to the decisions made by the supply chain. Contractors working through their own limited company typically take on all the financial risk of running their business without entitlement to employee benefits or a notice period. As the current legislation stands, they can be shunted onto a third-party payroll and expected to comply unquestioningly with the same terms, while being taxed as an employee.

While the government’s latest consultation document on off-payroll working acknowledges the need for better communication between parties in the supply chain, the changes it proposes are inadequate. Although the contractor must be informed of the client’s IR35 decision directly, rather than via an agency or intermediary, their only recourse for challenging this decision is a proposed client-led procedure, which can hardly be expected to be impartial.

The situation will still leave many contractors in the position of having to accept the clients’ decision, which they have reached using the questionable CEST tool, and wait until the end of the year to raise any dispute.

While the issue of CEST receives the obligatory reassurances that changes are afoot, progress seems inadequate given the vital function that the online tool plays. In fact, there’s evidence to suggest that CEST was rushed in from the beginning, with a series of brief, oversimplified questions launched just three weeks prior to the reforms being implemented in the public sector.

Elsewhere, the consultation document proposes to do away with the 5% allowance claim in line with public reforms, while deferring the issue of employment rights to a separate consultation. If the document does little to address the question of workers’ rights, the recent actions of some companies attempting to have their cake and eat it offers contractors little reassurance for the future.

In the recent case of Hermes delivery drivers being offered a ‘self-employed plus’ contract by the delivery company, some 15,000 workers were offered holiday pay, union representation and guaranteed earnings. What looks like a victory for drivers at first glance is actually a fudging of the issue, as couriers for the firm were never self employed in the first place. The workers should have been entitled to the full range of employment benefits, instead of a halfway measure that effectively allows organisations to pick and choose the employment benefits they grant workers.

The IPSE has warned that creating a ‘self-employment plus’ status could further confuse the debate over employment status and distort understanding of what genuine self-employment is, they state: “We believe the way to clear the confusion about employment status is for the government to write into law a statutory definition of self-employment. At the moment, there is a legal definition of both worker and employee status, but nothing for the self-employed. A statutory definition would not only protect legitimately self-employed people, but also ensure that workers who are wrongly classed as self-employed, such as the Hermes workers, have the rights and protection they deserve.”

There are also concerns that, in the wake of Brexit, employment laws deriving from the UK’s EU membership that cover areas such as paid parental leave, leave for carers and flexible working, will not be watered down. Although the Prime Minister has given previous reassurance on the matter, claiming that the UK has always been a forerunner in the case of workers rights, practical steps must be taken to redress unfair treatment. If contractors are forced onto PAYE, it seems likely that they will start demanding the rights they are entitled to. Despite the fact that this will see organisations incurring significant costs that reduce the cost-effective incentive for employing contractors, until a better solution is found, this may be the price that firms assessing contractors as deemed employees are forced to pay.

IR35 has been a minefield since it was introduced in 2000. The diverse nature of contracting and the needs of those that work in the industry needs to be carefully considered and legislation drafted accordingly.

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