The government announced in October 2016 that a top level review would look at employment rights and practices affecting some six million workers, including the 1.7 million strong army of contractors. The man whose mission it is to examine the current status quo is Matthew Taylor, current CEO of the Royal Society of Arts and former adviser to ex-labour leader, Tony Blair.
We examine the proposals, and consider the implications for contractors of what Prime Minister Theresa May referred to as “keeping pace with the changing world of work”.
The government has acknowledged that an ever growing number of professionals are now choosing to work for themselves in a more flexible capacity. This demographic does not just include limited company contractors but also thousands of self-employed freelancers, temporary and part-time workers.
The key issue, however, centres around how workers are treated and not how they are engaged. Ensuring that those on zero-hours contracts enjoy the same standard rights as their permanent counterparts – maternity leave, sickness pay, holiday pay and pensions auto-enrolment – seems fair enough given their lower levels of pay. The shoddy practices of some employers need to be clamped down on, and self-employment status should not be misused by organisations to shirk their responsibilities.
Reduced rates for contractors
Some of the areas the review will look at certainly have their merits. Questions such as whether contractors and temporary workers are receiving the right training, if they require other representation outside of trade unions are all very worth considering. But by attempting to harmonise workers’ rights across the full self-employment spectrum, the government risks alienating those very people who are a key net contributor to the UK’s economic fortunes.
The situation for limited company contractors is very different from that of zero-hours contract workers. These highly-skilled operatives have deliberately chosen to forego the standard suite of employment benefits and security of permanent employment in exchange for the increased earning potential and flexibility that contracting brings. Sick pay, holiday pay, employer contributions to a pension fund and all the other hard-won benefits of employment rights are very tempting, but they have to be paid for somehow.
Either the employer or the government would have to foot the bill – which only means that the contractor would end up paying it. The end result, if the employment rights were to be standardised, would be a greater tax burden on contractors and potentially even automatic IR35 status being imposed. If the engager were obliged to incur the costs, then reduced rates would be a mere formality.
With the exception of those working under umbrella companies, warning bells will sound if the government’s review fails to differentiate between the highly skilled limited company contractor and the more low-skilled temporary worker. If it doesn’t, then this will seem like another hammer blow for contractors and the contracting industry coming in the wake of public sector IR35 reforms.
The workers’ rights review could prove to be not just another unwelcome setback for contractors but also for business leaders hoping for a reduction in red tape following the Brexit ‘leave’ vote in June 2016.
Contractors dont give up any employment benefits. I still get paid if I’m off sick and have paid holiday time, and training. Even maternity and paternity leave. It’s my company that provides those things. Not my company’s clients, obviously.
The debate should not be framed that I as a contractor have given up any benefits provided by a different company! I still have those same benefits provided by my own company, albeit carrying a higher risk to obtain them.
This scenario assumes both the ‘client’ and the ‘contractor’ are based in the UK. I, like many thousands of other freelance workers, typically work with overseas clients. I invoice them for a service. What that service *doesn’t* include is a provision for maternity pay, sick pay, mandatory holidays, etc. If I don’t work, I don’t get paid. There’s no way I could turn to an overseas client and say “oh btw, if I get sick next week and can’t produce what you paid for, you’ll still have to pay”. I hope the government will bear this (increasingly common) scenario in mind when designing universal employment rules.
And btw, I’m okay with that. It’s the trade-off a contractor chooses to make. The chance for higher earnings, with a reduced safety net. That’s generally what being in business for yourself entails.
Matt – the key is that the client does not have to provide any of that; nor do they have to grant employment rights. I’d say these are relevant considerations in addition to anything more primary you have in mind. A differentiation should be applied for those ‘forced’ into SE, if the government is ‘concerned’ about that (or rather, lost revenue, in reality.)
Also, this insanity should be worrying, if http://www.contractoruk.com/news/0012727why_futures_not_bright_ir35_advice.html
In theory I welcome this review but have my doubts about its real agenda. Let’s put a contractor who is paying for a private sickness policy and pension scheme in the mix, but let’s also include directors of big companies particularly those with shares or share options in their package. At the lower end of the scale zero hours contracts seem to me to be one sided. Perhaps also an investigation into temporary jobs where employees are churned to avoid anyone having employment rights. A broad and thoughtful analysis would be interesting – I am not holding my breath.