Earlier this month, the online taxi service Uber was directed to recognise their drivers as employees rather than contractors, after the Central London Employment Tribunal’s decision went against the firm.
It started with two drivers (supported by the GMB Union) who argued that they not self-employed but were company employees and therefore, entitled to a backlog of retrospective payments and employment benefits. On the other hand, HMRC inquired into the affairs of several BBC presenters (public sector remember) and their IR35 status, which resulted in two presenters being found in breach of IR35. Whilst the number was only two, the decision was a clear signal to those working in the public sector that things are changing come next year’s new regulations.
Without going into too much detail about the hearing, comments and so forth – we’re going to focus on what this means for the world of contractors and the self-employed.
Power to the…People?The Uber ruling did demonstrate that power can still lie with the self-employed and contractors when it comes to taking on the big corporations. Whilst it’s a win for the drivers concerned, it does raise the question as to why they became part of Uber in the first place.
Majority of contractors and the self-employed choose to go down this route as it offers them considerable benefits over the regular permanent roles. A significantly higher salary or pay, as well as flexibility in their working hours so for the drivers to raise the issue of backpay and employment rights is a little confusing, considering approx. 80% of Uber’s contractors are happy with their conditions.
The ‘gig economy’ (where contractors essentially work on short term assignments but are recognised to be part of the main company) is an increasingly popular concept in Europe and across the world and fast becoming the ideal platform for many contractors to work on as it gives them the recognised brand but allows them to operate independently, setting when and where they want to work. So not unlike a franchise arrangement, but for the flexible workforce.
Will more cases like this arise? Only time will tell.
The long hand of HMRCThe BBC ruling sends a warning shot to those operating their own limited companies. It demonstrates that HMRC are now actively pursuing what it considers to be disguised employees under the existing legislation, which up until now it had been ineffective at best. This is surely a precursor to a more aggressive approach when the IR35 test becomes much more tangible (new IR35) at the beginning of the 2017-18 tax year. We’ll know more following Mr Hammond’s Autumn Statement on 23rd November 2016.
In April 2016, the Government saw the perfect opportunity to squeeze the contracting industry by eliminating the benefit of umbrella expenses and they’re looking to do the same with limited company contractors. They want more of your money (like all western governments post GFC) and they are actively seeking to eliminate the fiscal advantage generated by contracting through a limited company, for ALL those other than genuine career contractors working in the private sector.
The alternative?There is a new champion for contractors that are currently in a limited company, that can either match or better their take home pay but with some big advantages. A mutual payroll solution gives you the best of both worlds – better net pay without the hassle of paperwork and the (soon to be rising) costs of having an accountant. Added to that benefit of not coming under the IR35 spotlight, being able to process your reimbursable expenses and possibly your non-reimbursable expenses (due to the collective or mutual effect) plus many other major benefits.
Being with a mutual payroll solution starts to sound significantly better as an alternative to limited.
Give us a call or speak to one of our specialists about the options available to you. Alternatively, fill in out pay illustration form and we can work out exactly what you’d get. The future is most definitely mutual.