REC questions the fallout of Onshore Employment Intermediaries legislation

Thursday 15 May 2014

With Onshore Employment Intermediaries legislation now in force six weeks, the Recruitment and Employment Confederation (REC) has begun to look at the fallout from the changes.

Indeed, the period has been anything but smooth for contractors and the self-employed. According to the REC, market distortion has intensified since the changes came into force - going against the aims of the legislation.

What's more, new avoidance models have come to light which - while not yet all strictly illegal - have been morally and ethically dubious.

Elsewhere, those previously classing themselves as self-employed have downed tools in response to their change in status and the reduction in take home pay, the REC explained.

Onshore Employment Intermediaries legislation has also placed advisory bodies in something of a conundrum.

"Schemes that rely on avoiding NMW obligations, processing inflated expenses claims or that push workers into single person umbrella companies leaving them powerless to take action if they are subsequently exploited are not models that we can, in good conscience, promote to our members," the REC declared in a statement.

In a bid to ensure conditions improve, the body has met with HM Revenue and Customs (HMRC) to talk through common concerns about the recent changes.

One of the positive things to come out of the discussion was the acknowledgement by the government that there are shortcomings to the legislation.

HMRC is also aware that new avoidance models have been created and it is currently working to tackle them. In fact, a technical note on the matter is set to be released.

What's more, the department is speaking to major employers about the risks of engaging with suppliers that are part of the new wave of avoidance schemes.

For construction contractors, the news that Construction Industry Scheme helpline members have now been fully briefed will come as a relief. This will help to clear up confusion and align messages coming out of the helpline.

However, there are still areas that are a cause for concern. For example, end-user liability for tax and National Insurance Contributions is still a grey area. Consequently, many are choosing to bury their heads in the sand, according to the REC.

"Knowing they are not at risk of any financial liability, too many hirers are looking only at the bottom line price, regardless of the sort of avoidance models that are being put in place to achieve the figures," the body said.

What's more, details of the HMRC evasion inbox have yet to be published, which will be a vital tool for raising issues of non-compliance.

The continued creation of schemes such as the Elective Deduction Model remains a concern.

This scheme is currently being marketed as a way to classify workers as self-employed but mark them as employed for tax purposes.

The Freelancers and Contractor Services Association (FCSA), the REC and APSCo have all aired their concern about the scheme.

Matthew Brown, FCSA non-executive chairman, explained that these avoidance measures give workers very little protection and create huge risks for end-clients.

By Victoria McDonnell

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