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Self-employment in the spotlight

31 Mar 2017

The structure of the labour market is changing, with the ‘sharing’ or ‘gig economy’ becoming increasingly popular. Rather than the classical one, full-time job, many people are becoming self-employed.

The question of whether people are becoming self-employed because of a genuine desire to do so, or if it’s due to an imposition by the employer, is beyond the scope of this blog. What is the case though, is that there are many rights attached to being an employee / worker and while there are many advantages to both sides arising from the self-employment status, there are fewer rights for the self-employed.  

The increased use of the self-employed status has left employers and employees in a quandary. The Uber and Pimlico Plumbers cases demonstrate that the courts and tribunals will intervene to protect workers. Employers want to ensure that their workers adhere to quality control standards but they do not want to overstep the mark in exerting this control to the extent that the workers are in fact (and law) regarded by the courts and tribunals as employees or workers.

The Chancellor of the Exchequer, The Rt. Hon. Philip Hammond, recognises the changes in the employment market. His attempts to equalise the NICS class 4 (self-employment contributions) in the March 2017 Budget were a recognition of the problem. Whatever the political rights and wrongs his basic rationale was that if you are earning £x then it ought not to matter whether this is earned on an employment basis or a self-employed basis. His second rationale is simply that if current trends continue, the tax benefits enjoyed by self-employment model will cause an increasing gap in the country’s revenues.

The government’s implicit message to the courts and tribunals is that they are not happy with what they see as an “aggressive” use of self-employment and they will back attempts to cut down on what they see as an abuse of the self-employment status.

The Chancellor cannot attack (in this Parliament at least) the revenue gap by equalising the tax benefits / burdens on self-employment. What he can do, though, is to signal loud and clear what he sees as the abusive use of the self-employment status in circumstances where he feels it is not “real” self-employment.

The Department for Business Energy and Industrial Strategy announced back in March 2016 a review on employment practices. It will be chaired by Matthew Taylor, currently the head of the Royal Society for the Encouragement of Arts, Manufactures and Commerce in the UK. He is widely respected across the political spectrum and his committee is due to report in summer.

I suspect that the Taylor report will define self-employment tightly and also recommend a change in the taxation system (moving away from tax based on status, to tax based on work done / income earned).

The word of warning to employers in this blog is that the courts, the tribunals, the government and HMRC are increasingly looking at what they consider to be the use of the self-employed status where the reality is that the relationship is an employment or a worker relationship.

We are considering a seminar on this subject. Are you interested? If so, email Jonty on jonathan.compton@dmhstallard.com.

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