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Contractors urge government to end ‘zero-rights employment’

With two thirds of contractors working inside IR35, the government has been urged to abolish ‘zero-rights employment’

The call comes as 65% of contractors have been placed inside IR35 by their client following the introduction of IR35 reform in the private sector on 6th April.

Research by Qdos found that around two-thirds of contractors are now working inside IR35 – a scenario where they are subject to employment tax but do not receive employment rights in exchange. 

The study also showed that by working inside IR35, contractors can take home significantly less after tax – anywhere between 20 and 30 per cent.

Current rules are ‘illogical and unjust’

As a result, 8 in 10 (82%) contractors surveyed have called on the government to end what is known as zero-rights employment and offer them employment rights when working on inside IR35 contracts.

Seb Maley, CEO at Qdos, backed the call from contractors, adding that being taxed as employees but not receiving any rights is “illogical, unjust and must be eradicated.”

He said: “The government needs to put an end to zero rights employment once and for all. It was already an issue, but the introduction of IR35 reform has exacerbated the situation. 

“Thousands of contractors are now working as zero rights employees – often as a result of needlessly risk-averse and sometimes non-compliant IR35 decisions carried out by businesses in response to the reform.”

Employment rights and tax status must be aligned

Maley suggested that employment rights should be aligned with tax status so that contractors who are taxed as employees also get holiday and sick pay as well as maternity and paternity privileges.

He added: “The government promised to look into this some time ago, but it should have been done before IR35 reform was enforced.

“It’s astonishing that Westminster still has its head buried in the sand, showing how unsupportive it is of the independent workforce, which is arguably one of the UK’s most valuable economic assets.”

The Qdos poll also revealed that around two-thirds of contractors are not confident that medium and large businesses – whose responsibility it now is to determine IR35 status – will be able to manage the changes. 

Government must ‘reset’ its relationship with contractors

Commenting on the findings, Andy Chamberlain, Director of Policy at self-employment trade body, IPSE, said: “The changes to IR35 have piled disaster on disaster for the self-employed sector. 

“They came into effect at the worst time for freelancers and the self-employed: compounding the financial damage of the pandemic by not only reducing the work available, but also ensuring that a large proportion of the sector have to effectively work in zero-rights employment.

“[…] The contracting sector used to be one of the most dynamic and innovative parts of the UK economy, but it has been undermined again and again by this government: from the devastating gaps in support to the havoc brought on by the changes to IR35. 

“If this sector is ever to play its once crucial role again, government must reset its relationship with it and clear up the mess and confusion in the wake of IR35.”

By Contractor Weekly

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29 thoughts on “Contractors urge government to end ‘zero-rights employment’”

  1. Gary Andrews

    Give up, contractors will never get a fair deal from this regime, that much is obvious. Help will only come once they are ousted from power and real inquiries are allowed. Time for inquiries without ex Bullingdon boys running the committees, bribed with knighthoods for a favourable conclusion.

    So many lives ruined, so many livelihoods curtailed with their message of “Stay in your lane, peasant”. This government need to fall if we ever want access to justice.

    Time for a general strike. Half the country has been abused by these populists. An engineering strike might not be noticed for months but NHS or haulage workers could bring down the government in days. We need our lives back; we need fair and competent governance.

    • Colin

      You can blame the Tories as much as you want but the original legislation was introduced by Labour

      “On 9th March 1999, The Inland Revenue (HMRC) published a press release – numbered “IR 35” – which detailed Gordon Brown’s plans to create legislation to “counter avoidance in the area of personal service provision.””

      The Tories need to rebalance IR35 and make it fair

      • Gary Andrews

        Not this distraction narrative again, are you a contractor or political activist?

        IR35 was changed to blanket legislate public then private sector with the change in liability to the client, from 2017 and 2021.

        This is the real problem we face right now along with the enboldment of the out of control revenue, let’s not delude ourselves these are the facts. Time to address the problem not play political whataboutery.

      • Martin Rose

        I totally disagree with you.

        As a contractor, you are declaring you are self-employed. Self-employed people do not have employment rights with their clients.

        They can ask to become an employee, but there should be no automatic entitlement.

        • Paul

          Well there should be no automatic employee taxes then.
          Otherwise they are zero rights employees, the whole point of the article you haven’t read.

      • Martin Rose

        It was Dawn Primorolo what done it, Guvnor.

      • Johnny

        “You can blame the Tories as much as you want” – Colin
        We do, because the decimation of the contracting industry is firmly the fault of this Tory government. Or have you been smoking crack for the last five years and missed it?

      • Paul

        Browns’ IR35 in 1999 didn’t kill contracting, although he was a twat for doing it.
        Sunaks’ IR35 in 2021 DID kill contracting.

        • CG

          This nice Mr Brown also buggered up pensions and for what reason?
          He changed the rules. Harvested £5 Billion pa in increase tax receipts. 3 Years later there was a £15 billion black hole in the pension funding. Coincidence? And why did he feel the need to increase ( tax neutral) retirement age to 55?

          IR 35 – what do we get for the extra NI Payments?

  2. Sunil

    Enjoy the the magic sauce, can you taste the ketchup of catch-up?

  3. Gabriel

    After the black death wages shot up for the third of the population left alive.

  4. Ian Sneyd

    Another, perhaps minor issue for many, but it annoyed the hell out of me until I gave up on contracting, is why are we expected to still charge VAT on what are now “wages” I never received a cogent response from HMRC to this question it’s almost as if they didn’t really understand IR35 ‍♂️

    • Gary Andrews

      Good point and exactly right. I’ve never seen this fact so much as mentioned but so obviously unfair to make us charge VAT on what IR35 states are wages.

  5. Graham Collins

    The mainstream media hasn’t helped. They’ve often made a big song and dance about ‘Freelancers pay less tax’. Well, due to various factors, this year I have taken an inside IR35 fixed term contract. The result: overall, the tax that HMRC will collect from me will be about 10% of previous years. And yes, my income is also greatly reduced. I’m doing the same (technology consultancy) work, but on different contractual terms. Everyone looses

  6. Onlooker

    Why should contractors pay Employer Tac if they are treated as employees?

  7. Andrew Harrison

    Tax legislation has always had this ad hoc sticking plaster nature. The payment and employment route for the money should not impact the tax taken. Issue share options to give capital gains (board members!) should give the same rewards to the taxman as payroll payments* as dividend payments as outside IR35 payments. The problem is that each is sliced in different ways under different parts of the legislation.
    * if you are employed then there are none cash benefits, pensions, sickness etc. so these need to be included in the employer costs.

  8. Jamie

    This is all true, but a lot of clients are side stepping IR35 SDS’ and forcing contractors down the UNREGULATED Umbrella Company route; sometimes dictating which umbrella company.

    These sharks make mega claims about employments rights but in effect they are doing very little; all tax, NI and holiday pay is paid for by YOU from YOUR income…so is not a benefit.

    This is unjust and has to be stopped, but we are stuck with rulers whose mentality is to change the rules if it doesn’t suite THEM. Look at Boris and his attempt to change the rules so he didn’t need to self isolate… changed his mind as it became politically difficult.

    For the record, this is not an attack on the Tories… a government of any colour is very unlikely to change the rules of an earlier administration that makes profit

  9. Andrew Harrison

    Why does holiday pay always appear in these articles? To my mind if an employee has a working year of 200 days then the daily rate should be the annual emplyee rate divided by 200 plus any premium for skills and flexibiity. What am I missing?

    • Jamie

      It’s not the holiday per say thats the issue; the false misleading claims and the unjustness zero rights employment

  10. Sam

    There are no employment rights for contractors. They don’t get sick pay, holidays , bonus, paternity leave, maternity leave , trainings etc etc . IR35 is grossly unfair . Sone tax issues could have been easily resolved thru other routers .

    • Martin Rose

      I totally disagree with you.

      As a contractor, you are declaring you are self-employed. Self-employed people do not have employment rights with their clients.

      They can ask to become an employee, but there should be no automatic entitlement.

      • Kate

        Come back when you know what you’re talking about Martin Rose. I bet you don’t even pay national insurance let alone have life experience running a company.

  11. XY

    The key point that people seem to miss is that employment rights are provided at a cost to the employer, while the government collects the Employers NI for an inside IR35 contract.

    Any further hit on business costs will act as a downward force on contract rates.

    So – contractors may get those rights, but at a cost. Be careful what you wish for.

    The real fix to IR35 is to make sure that employers NI is not payable – either scrapping it (unlikely) or increasing the threshold at which small businesses pay it (and including one-man businesses).

  12. Martin Rose

    Why apply for a temp. contract job, if what you really want is a permie one?

  13. Contractor John

    IR35 looks like it was designed to placate unions.

    It hinders R&D as contractors are unable to fund new income streams.

    It forces workers to hire a boss (umbrella companies)

    It denies the right to profit from your own labour.

  14. Hectors ArseO

    This is pure BS

    IR35 was just an unfair way to try and force independent workers to sit and rot in one place

  15. Hectors ArseO

    Why do we have working tax credits for permies?

    Is it because they couldn’t do the job in the real world, they cannot stand on their own 2 feet and need a whole HR dept to wipe their a sses

  16. Consumertron

    Thanks for the article. Glad these issues have come to the fore again. Contractors are completely shafted every which way and this was highlighted to me recently when I ‘dared’ to stipulate flexible working conditions. Permanent employees don’t like us because they think we get paid more than them, however, we lose out in so many other ways. System has to change.

  17. Washed Up

    I am now virtually retired (forcibly) from contracting which I did for over 45 years.
    I think we all need to consider why we went into contracting in the first place.
    For me it was much better financially and I liked the freedom of not being expected to be loyal to some company that didn’t prioritise my interests (I never contracted with any that did). The contract was simple, I do your job, you pay me what I consider reasonable or I find better and walk when I can. It’s always been about supply and demand.
    The rules have now been changed and the model is broken, I doubt it will ever get better.
    If you can get paid more being staff, including all those holidays (and fake holidays for illness, grannie’s funerals etc) then go for it, have a bit of a rest.
    If not then you better learn to live with it and wait for the system to reset.

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