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 protectionsThis 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.
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There was a Newsnight piece a few weeks ago which showed that this practice is rife in the hospitality sector. In particular they hire immigrants from Bulgaria and Romania, who are only allowed to work here at the moment as self-employed.
Isn’t this a feature of the ‘flexible labour market’ that representatives of the CBI, etc, etc and Tory and LibDem ministers were singing the praises of when they lowered the time period for redundancy consultation, yesterday, Richard.
And doesn’t the government hang its hopes for any glimmer of an economic recovery in 2013 on the construction/housebuilding industry? I don’t expect any positive response to the UCATT report in that case. We can, of course, expect Saint Vince to pop up and say what a dreadful rip off it is, write a piece for The Guardian (in which he says nothing of substance) and then add it to his long list of issues he does very little, if anything, about.
You sum upo Vince all too well
The construction industry self employment scams are a bit like the tax-avoidance industry, as soon as one loophole is closed another is opened.
A close look at employment agency practices should be entertained as well….
Surely this goes back to the cuts suffered by HMRC over the last few years?
How many employment status inspectors do they actually have?
Not nearly enough
Employers NIC should be cut substantially or applied to the self-employed.
I know you don’t consider it tax avoidance, but your own relationship with the Joseph Rowntree Trust is similar. If they employed you under PAYE then more taxes would be paid.
It would be slightly odd for me to be an employee of the JRCT
They give me a grant
And a couple of times a year I tell them what I have done with it
That’s about as far from employment as it gets
Nor is it a service
Indeed, HMRC have told them it’s not taxable – but I make sure it is
Actually Government at all levels and quasi Governemnt bodies are one of the biggest offenders in this matter because they employ loads of contractors . Expect a perfect storm here soon, because Government is now cracking down on its contractors under IR 35 (and by a very dubious mechanism). Yes it will raise more tax, but these contractors would love to have the employment rights you mention, so they will have the worst of both worlds
of employment/self employment .
Have a good Christmas!
Surely the claim that “false self employment” is immoral not illegal is a false premise. If someone is dishonestly treating employees as self employed then that is a crime. One has to say the conspiracy to commit this crime probably extends to HMG and HMRC itself. Because the construction industry is hard pressed (which it truly is) it doesn’t do to take too hard a look at their practices. Better to focus on the “real criminals” like smugglers and EMTEC fraudsters. Very similar to the banks and another example of how regulatory capture has corrupted our justice system.