Recently, there have been a number of cases where it has been claimed that “self employment” and some “self-employed” workers are only labelled as such so that companies can avoid tax and minimum wage laws.
Fortunately, there is a piece of legislation in place to prevent tax avoidance – with regard to self employment – known as IR35.
What is IR35?
IR35 refers to anti-avoidance tax legislation specifically designed to tax ‘disguised employment’. Essentially, the aim of IR35 is to prevent an individual, who under ordinary circumstances would be viewed as an employee, from offering their services through a limited company in order to avoid paying income tax & NIC.
Is IR35 doing enough to prevent companies from taking advantage of self-employed workers?
Well, no, but this isn’t the intention of IR35. There is, however, a strong argument to be made for introducing a new piece of legislation that will serve to protect workers from being classed as self-employed when they really ought to be classed as an employee.
A recent example of this is when food delivery company Deliveroo was told by the Government that it must pay its ‘self-employed’ workers minimum wage unless they are ruled as genuinely self-employed by a court or HMRC.
This came in response to when a number of Deliveroo cyclists staged a protest in central London over a newly proposed wage system. The new pay structure would mean that instead of receiving a fixed £7 per hour plus an extra pound per delivery, riders would receive just £3.75 per delivery.
The debate quickly came to a close when the department of Business Energy and Industrial Strategy insisted that Deliveroo workers must be paid the national living wage unless they have officially been deemed as self-employed by HMRC.
A spokesperson for BEIS said: “The government is determined to build an economy that works for all – that includes ensuring everyone gets a decent wage. An individual’s employment status is determined by the reality of the working relationship and not the type of contract they have signed.”
The Government is sending a message that workers aren’t self-employed just because their contract says so. Deliveroo isn’t the only large company to have come under fire for this, other names such as Uber and Pimlico Plumbers often come up in any such debate.
So, what does the future look like for the so-called self-employed?
It seems the dividing lines between ‘employee,’ ‘worker’ and ‘self-employed’ are becoming increasingly blurred and there certainly seems to be no consensus over what determines employment status.
Considering the level of exposure this debate is getting, it seems inevitable that the Government will eventually respond with a new piece of legislation that will prevent instances such as these in the future. Perhaps a new employment category will be introduced wherein there will be a degree of flexibility for individuals and businesses while ensuring some basic employment rights.
Current legislation doesn’t seem to be able to cater to new-age companies such as Deliveroo and Uber, so it could well be that new legislation is required to safeguard the rights of workers.