As the Guardian and many others have noted:
Employment rights of workers in the gig economy have been boosted after a heating engineer won his claim against Pimlico Plumbers at the supreme court, establishing that he was a worker and not self-employed.
The supreme court's unanimous judgment is likely to set a significant precedent for a series of protracted legal battles, such as those involving the cab firms Uber and Addison Lee, which are in dispute with their drivers over their employment status.
Pimlico Plumbers, which lost at every stage of the dispute, had appealed to the UK's highest court, arguing that those it sent out to repair leaking pipes and malfunctioning dishwashers were self-employed and not “workers”.
This matters.
First, from a tax perspective the decision is right and was always going to be found this way. It is absurd that anyone ever thought otherwise. The people working for Pimlico Plumbers were so obviously employees that serious questions have to be asked about the judgement of anyone who could have suggested otherwise. I hope the professional bodies regulating these advisers take note. If I was Mr Mullins I may well be suing.
Second, I hope HMRC now pursue the correct tax from all the firms who have been avoiding the employer's national insurance obligations by inappropriately treating their staff as self-employed people. If they don't, serious questions have to be asked.
Third, if these firms face what Charlie Mullins of Pimlico Plumbers predicted would be a "tsunami of claims", so be it. Making money by avoiding legal obligations to staff and others, as it is now clear has happened in this case, is unacceptable to society. If a business model cannot survive without abusing the tax system then it does not deserve to survive.
And fourth, this is massively important for all; those in deeply vulnerable employments and the sham self employments that have proliferated in recent years and which have supposedly created the impression of full employment in this country know there is no such thing, and that instead vast numbers of people live in perpetual fear of not working because they have no rights or security.
After 1945 this country was rebuilt on the basis of a social safety net that relied on mutual obligations, tax being paid and benefits being available. Those employers who use false self-employed status have sought to challenge this. What this ruling says is that this no longer acceptable: the safety net must be rebuilt and the obligations must be settled.
The likes of Charlie Mullins might not like this, but the rest of us should celebrate.
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Walk into just about any local Council these days and it is full of self employed contractors.
Plenty have been there full time for years on end. Pretty much integrated into the organisation, treated as employees day to day.
Since April last year they are being taxed as employees but not before then.
And there are no employment rights – no holidays, sick pay etc. But the pay is better because you’re outside the dreaded ‘job evaluation’ regime which makes a permanent position unattractive and impossible for the Council to recruit to. They can advertise for years and get zero applicants in some cases.
And many of these Councils would be in a bit of a pickle if they got rid of this arrangement – roles would just be unfilled, work would remain un-done.
This happens regardless of the political colour of the Council.
The state is just as much a guilty party to all of this.
Absolutely correct. The same applies in the civil service. 70% of people in my organisation were contractors there for over 10 years on daily rates of 200 plus. Yet this sector was desperate to off load the permanent staff. Utter madness!
What you fail to appreciate is that for many private small businesses it is really difficult to employ permenant workers. I used to run a steel fabrication business and the industry was cyclical and employing contractors was crucial. We would have probably gone bust if we had to pay workers when we didn’t have the work to do. Perhaps Pimlico have a more stable supply of work, I don’t know. But it will be the same in many sectors, construction being a fairly obvious one.
The rules are clear here
And temporary working is possible in the PAYE system
After that, if the model cannot afford to pay people then it does not deserve to exist
Nathan, I don’t think Mullins falls into the category of struggling small business-man. This from the Sun:
With his Rod Stewart-style blond barnet, Pimlico Plumbers’ owner Mullins is instantly recognisable.
He was born in October 1952 in London and grew up in a council flat with his factory-worker dad and cleaner mum.
Inspired by Thatcher’s industrial revolution and the mantra of the self-made man, Mullins started his business in a basement and now has an empire serving the whole capital.
The charismatic businessman says he dreamt of becoming a plumber from the age of nine, and bunked off school to earn “two bob a day” working with the local plumber in Camden, London.
Mullins says that he was inspired because the tradesman was well-respected, had a great lifestyle and money.
Now 65, Mullins left school at 15 with no qualifications and became an apprentice, setting up Pimlico Plumbers in 1979 from an estate agent’s basement.
The dad-of-four is now worth a reported £70 million, lives in a central London penthouse worth £5 million and drives a £300,000 Bentley.
And this:
“Mullins is a Tory donor and cites Margaret Thatcher as an inspiration after he set up Pimlico in the same year she was elected.
He was also a business adviser to David Cameron and George Osborne under the previous Tory administration.
But as an avid Remain campaigner, he has been a vocal critic of Brexit and Prime Minister Theresa May.
Mullins helped fund the High Court challenge to stop May being allowed to invoke Article 50 without MPs’ approval, telling The Guardian “if it goes to parliament, people are going to see common sense on it”.
His accounts tell an interesting story
Adam S says:
“Walk into just about any local Council these days…….
“And many of these Councils would be in a bit of a pickle if they got rid of this arrangement — roles would just be unfilled, work would remain un-done.”
Indeed this is what central government starvation of local government has been doing. It does go all the way back to the Eighties and Margaret Thatcher’s time. It has been almost constantly unrelenting since. Cuts or freezes. Council tax caps etc.
“This happens regardless of the political colour of the Council.” Well, yes there’s only two colours to chose from in most places and sometimes you are pushed to tell the difference. Any other colour of council has the same constraints of inadequate funding to meet statutory requirements. It is and has been quite deliberate.
“The state is just as much a guilty party to all of this.”
Nonsense, Adam. The state is entirely and exclusively guilty. By sins of omission and sins of commission.
It’s years if not decades since HMRC sought to make anyone, continuously or predominantly (self) employed, by a single employer de facto employed for taxation purposes. It was very selectively enforced and apparently only very occasionally still is.
More honoured in the breach than the observance. Corporate capture. Great for high earning ‘consultants’, disastrous for everybody else. Including society generally.
Andy, they end up paying more doing it this way, so lack of money isn’t a plausible answer. They have plenty of money – it depends on which budget it comes from. Add to that the economic illiteracy of the ‘job evaluation’ systems.
It is an entirely avoidable organisational issue.
And the issue long pre-dates the Tories in power.
Adam S says:
“….Andy, they end up paying more doing it this way,…”
What a surprise. Like we privatise utilities and then spend at least as much paying out to the share holders even when there are no profits.
You may well be right that it all pre-dates the Tory government, but which Tories does it pre-date ? Thatcher gave it impetus, and there has been no easing back since.
That it costs more isn’t actually an argument not to do it in the cock-a-manie world of neoliberal economy, because that’s not what it’s about. In order to pay the difference local councils across the UK are selling off what’s left of public assets to balance the books one hopeless year after another.
The starvation of funding is the mechanism that drives it. The objective is to transfer assets under duress into the hands of the private sector.
Local councils get it in the neck from both ends. Constant reduction of services creates less and less effective local services so the councils have no public support even if there was one with the wit to challenge the process.
Well that’s how it looks to me.
Businesses do what they feel they must to cut costs. Sometimes they are over zealous. Pimilico Plumbers have been living in a fools paradise for many years believing they were saving a mountain of employment and payroll costs. I’m surprised you haven’t laid into their auditors Richard because at some point there must have been a massive failure to provide for these costs which any reasonable person would have recognised. The lawyers with their hopeful contracts also need to share the blame. The real problem is successive governments failure to 1. provide straightforward legal clarity, rather than gobbledegook regulations and 2 sufficient funding to HMRC to properly enforce the law. I joined Inland Revenue in 1984 and left in 1996, during that period they were tip toeing away from their responsinbilities and since then it’s been a head long gallop. Regulatory capture and the ideological necessity of boosting the “sham enterprise culture” have been a part of this. Pimilico is a particularly egregious example but don’t look for anything to change unless some serious stick is put about.
I have looked at the accounts
They are ‘interesting’
For decades governments of every persuasion (Labour, Coalition and Conservative) have attempted to impose tax without providing any of the rights and we are now seeing courts deliver the rights to certain people. Unfortunately it will be easy to push these individuals back into arrangements under which they have the tax obligations of an employee but no rights.
Why easy? Tax obligations under PAYE only apply to employers, so workers’ rights like holiday pay and NMW follow.
The “easy” option is to push the plumbers into becoming Limited Company contractors. There is plenty legislation out there which treats Limited Company contractors as employees of their own companies and subject to PAYE, but none of it gives them workers’ rights like holiday pay and NMW.
Michael, No, setting up lots of Ltd companies to disguise employment relationships is still illegal. The Tribunals have the power to look at the real substance of the relationships rather than the fictions invented by clever lawyers and accountants. HMRC NMW compliance ought to be investigating every instance where a business splits up its workforce into lots of little separate companies.
Regarding your point about making the ’employees’ set up their own individual limited companies the way, I have seen how this works and the setup is that you pay yourself the NMW and take profits as dividends. This avoids NI of course and can be quite a saving.
At my local car dealer when waiting for a job to be finished I picked up a business freesheet with an article by a firm of accountants outlining exactly how this could be done. It is perfectly legal but you must demonstrate that you have ‘direction and control’, able to appoint a substitute etc as the rules in IR35 show.
I have been there (on the other side of the fence so to speak) when working as an independent IT contractor.
The arrangement can be looked through if it is artificial
This is required in the public sector now
I suspect this will shift to all sectors in due course
Setting up lots of limited companies to “disguise employment” isn’t illegal, there is plenty legislation to deal with those situations but it only makes sure that those limited companies pay employment related taxes.
In the public sector there is now legislation to stop the payments happening by (broadly speaking) transferring risk to the employer
I suspect this will reach the private sector in time
Richard,
You say that “… if the model cannot afford to pay people then it does not deserve to exist”.
I note with much sadness that McDonalds are replacing minimum wage workers with computerised ordering machinery.https://www.illinoispolicy.org/mcdonalds-counters-fight-for-15-with-automation/
I presume you are not saddened by those developments?
Of course I am
I always go to staff in check outs rather than use automated check outs
Cofe Baker says:
“that McDonalds are replacing minimum wage workers with computerised ordering ”
Now who is going to employ all those graduates?
Yeah. But the only people who will benefit are HMRC Who pass the extra tax on to the government will no doubt spend it on fripperies If past experience is a guide.
Surely best to leave things as is and let the self-employed remain self-employed which means they pay less tax , keep more of Their earnings for themselves as has always happened in the past and decide how to spend the extra either on personal pensions, families ,vices or whatever .
After all it is up to the contracting party To decide whether or not to accept Employment from an employer who demands that they retain a self-employed status whilscarrying out his works. Bit like most of your local plumbers or electricians or other tradesmen And “lump” labour in the construction industry.
After all it is up to the contracting party if he or she wishes to join an organisation which decrees that he saw her status has to be self-employed.
With the respect, what you are saying is law can be over ruled by contract
Fist, do you realise the law is required to enforce a contract?
Second, do you really think legal obligations should be optional?
If so, why?
And what do you think the consequence will be
eileen james says:
“Yeah. But the only people who will benefit are HMRC Who pass the extra tax on to the government will no doubt spend it on fripperies If past experience is a guide…”
Further support here for rebranding as FFS I think. 🙂
Sorry Eileen, you really are writing nonsense which takes no account of the power employers have to force workers on to bogus self- employment contracts. If you need a job it is hobson’s choice, if the employer demands you sign something to say you are self-employed you have to accept it or you do not have a job.
Similarly I am now working on a zero hours contract not because I want to but because that is the condition my employer dictates. If I objected then the number of hours of work I am offered would reduce to zero.
It is not just HMRC who will benefit from the Pimlico decision. The workers will benefit because they get the right to NMW, and rights to holiday pay , which is worth a pay increase of over 11%.
Liosafterslumber says:
“It is not just HMRC who will benefit from the Pimlico decision.”
This demonstrates perfectly how an agenda gets hijacked. Eileen has trotted-out the MSM garbage and you’ve picked up the bait and run with it.
HMRC does not benefit at all. It’s a government tax collecting agency. You’ve been suckered into accepting, tacitly, that HMRC has skin in this game and it doesn’t.
This is one of the oldest tricks in the book in terms of controlling the parameters of a discussion. Do read Noam Chomsky’s ‘Understanding Power’.
This is a great result, and surely a Deliveroo rider or Uber taxi driver is far more obviously not self-employed in business in their own right than a plumber ever could be.
There certainly should be a “tsunami of claims”. The workforces making them should be assisted by the enforcement agencies like HMRC, but HMRC has been indulging in a prolonged bout of self-harm were they are making their trained and experienced inspectors redundant.
Questions need to be asked as to why legal cases like this are not being fought through by HMRC.
As it happens my son is a part time deliveroo employee whilst at University, just decides what hours to work & when he wants..most of the riders are similarly flexible in their hours. Obviously there is a good chance this opportunity for part time work will now be closed.
No it won’t
It will just be taxed differently
On the contrary, Nathan’s son should rejoice as he may soon be getting a backpay of holiday pay, worth more than a 10% pay increase. He needs to keep a record of his hours to claim after he leaves. Deliveroo jobs won’t go away because there is a point to their business model. Every chinese takeaway that employs (“self-employs”) a delivery driver to sit around doing nothing waiting for orders is probably breaking NMW law, but the economies of scale of Deliveroo make paying a decent wage possible. Unfortunately at the moment Deliveroo are too greedy.