The problem of false self employment – costing £1.9 billion a year, at least

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The UCATT trade union has published new work on the problem of false self employments, which I think is  a massive issue with regard to both tax lost and labour rights in the UK. As they say:

False self-employment is used by many employers to evade taxes and engage workers without having to respect employment rights and entitlements such as holiday pay, sick pay and pensions. It is immoral though not illegal.

Undoubtedly, it is the biggest employment rights challenge in construction.  Despite decades of campaigning by UCATT, many employers still seek routes out of fair employment. From misuse of the Construction Industry Scheme (CIS) to payroll companies, false self-employment is rampant.  Today, UCATT estimates over 50% of those working in the industry are falsely self-employed. The CIS Scheme is the main facilitator of false self-employment.  It allows companies to deduct tax at source and avoid employing workers directly.

No wonder we have a tax gap. But it’s more than that. As they note:

Workers engaged in false self-employment miss out on rights such as:

• Paid sick leave
• Holiday pay
• Overtime rates
• Redundancy pay
• Travel allowances
• Pension contributions
• Employment protections

This means that you only get paid for every day you work and do not enjoy the entitlements listed above that other employees take for granted.

That’s why UCATT makes this their number one employment priority for members. UCATT’s report The Great Payroll Scandal estimates that false self-employment is costing the Exchequer £1.9 billion per annum. As well as the impact that this has on individual workers, this is money that needs to be collected to give construction spending a shot in the arm and support jobs and apprentices. This is money that should be used to help rebuild schools, roads and hospitals. That’s why we must stamp this out.

As UCATT also notes:

In recent years there has been a major change in how false self-employment often occurs. A multi-million pound industry has been created to try to legitimise these practices. Increasingly individual firms are outsourcing false self-employment practices to payroll companies.

A payroll company operates by requiring a worker to sign a contract stating they are self-employed. In many cases the worker in reality still works for a single employer but will be denied all the rights of an employee. To add insult to injury the worker is usually expected to pay for the payroll company’s services with a weekly charge (usually £15-£25) taken directly from their wages.

Again, UCATT a highlighting a real issue of major concern.

I warmly support their work.