Bogus self-employment

Unions have long campaigned against bogus self-employment, in particular in the construction sector. In 2012, a report commissioned by construction workers’ union UCATT, The great payroll scandal, revealed the extent of abuse by payroll companies, used to codify false self-employment. Under the scam, workers sign contracts with payroll companies to get work and are then wrongly classified as self-employed for tax purposes, losing their employment rights in the process.

Now, HMRC has acted to change the rules to combat disguised self-employment, in a move cautiously welcomed by UCATT. The new rules took effect from 6 April 2014.

Under the new rules, individuals supplied through a payroll company to work under supervision, direction and control are to be treated as employed earners for tax and national insurance purposes, even though they are under no obligation to provide work personally (Finance Bill 2014). As a result, these workers will become eligible for basic rights such as the National Minimum Wage, Statutory Sick Pay, and holiday pay. The payroll companies will be required to deduct PAYE income tax and pay Class 1 NICs from their wages.