REC and PCG warn George Osborne over flexible labour threat

Thursday 13 March 2014

New restrictions on self-employment proposed by HM Revenue and Customs (HMRC) could make the UK labour market more rigid, deterring people from becoming a contractor or limited company.

The Recruitment and Employment Confederation (REC) and the PCG have written to chancellor George Osborne ahead of his budget claiming he could harm the flexibility of labour if he steams ahead with the changes. What's more, job creation and economic growth could be threatened.

The experts claim that the reforms from HMRC based on the Onshore Employment Intermediaries consultation will effectively remove self-employment as an option for anyone sourcing work via an employment agency from April 6th.

Mr Osborne is being urged to give businesses time to renegotiate contracts and adjust project budgets.

The REC and PCG maintain that the cost to employers trying to access flexible labour will increase as much as 25 per cent.

Construction, oil and gas, engineering and IT will particularly feel the impact - a concern to the UK economy, as these are currently key growth sectors.

Kevin Green, REC chief executive, said: "This draft legislation was sprung on businesses at very short notice. There is now less than a month to go before the new rules would come into effect and the government still hasn’t published its final guidance for employers.

"This scramble to implement shows a lack of understanding about how business works and the complexity of contracts for long-term projects. If these changes are rushed through they risk having a negative impact on job creation and growth in sectors that are vital for the recovery of the British economy."

Simon McVicker, director of policy and public affairs for the PCG, added that while HMRC has aimed ensure limited company freelance businesses that they would not be affected by the Onshore Employment Intermediaries legislation, guidance currently does not give the guarantees needed by freelancers.

Mr McVicker claims that HMRC needs to explain clearly how the changes will affect limited companies or risk widespread confusion among businesses that will lead to the wrong application of the legislation. This will then put freelancers at a clear disadvantage.

By delaying the implementation of the legislation, the government will have time to make the amendments needed to ensure it is properly understood, while businesses will have wiggle room to make necessary adjustments.

When in force, the changes will affect the Construction Industry Scheme (CIS) - a compliance programme for self-employed construction workers.

Set up in 1972 and relaunched in 2007, the scheme also monitors payments to and from subcontractors but has been abused over the years.

During the Onshore Employment Intermediaries: False Self-Employment consultation, HMRC declared that registering to the scheme is not tantamount to their agreement that a worker should be procured on a self-employed basis.

The government is now trying to make it so someone who is engaged by or through an intermediary in the same position as someone who is engaged directly.

This will close a loophole by removing the obligation of a worker to provide their services personally.

By Victoria McDonnell

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