It has been reported this week that Government Ministers have ordered a crackdown on companies that use large numbers of self-employed or agency workers. HMRC will be setting up a specialist unit (to be known as the Employment Status and Intermediaries Team) to investigate so called "gig economy companies" who engage individuals in this way as a means of avoiding employment rights and benefits that individuals would be entitled to if they were classed as employees or workers. This announcement follows an investigation by The Guardian newspaper into complaints of low pay against delivery company Hermes. Hermes denies any allegations of wrongdoing and has confirmed its cooperation with any investigation.
In addition, the Government is facing increasing pressure to crackdown on companies who seek to avoid employment rights, following claims issued by drivers of the taxi-app company Uber, who are currently awaiting a decision as to whether they should be classed as workers rather than self-employed; the latter classification would ensure they benefit from minimum wage, sick pay, holiday pay and pensions.
The investigation is likely to involve HMRC proactively investigating companies that declare they use large numbers of self-employed individuals but it will also focus on any intelligence and/or complaints received from individuals about alleged employment rights abuse.
This shift in approach by the Government has potentially huge ramifications for the so-called "gig-economy", a term that defines an environment in which temporary positions are common and companies contract with independent workers for short-term engagements. This trend for such engagements shows no sign of slowing down but companies need to be careful not to incorrectly label individuals whom they engage on a temporary basis; this in itself does not make them self-employed.
Employment status in the UK is determined by the reality of the working relationship between the individual and the company, not by the terms of any particular written (or verbal) contract. Companies cannot opt out of employment rights simply by labelling an individual as self-employed and, for example, engaging them via a consultancy agreement, rather than an employment contract. If challenged, a Tribunal would look behind any written (or verbal) agreement between the parties to look at what actually happens in practice.
This development runs alongside another initiative recently unveiled by Prime Minister, Theresa May. She has also ordered a general review into workers' rights in the gig economy, saying she wants to be “certain that employment regulation and practices are keeping pace with the changing world of work”.
These developments should serve as a warning to all employers to ensure that the individuals they engage are properly categorised and are engaged on the correct terms and conditions for their individual status.
If you have any queries about the issues raised in this postarticle, one of our team would be happy to discuss them with you.