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Commercial Flooring News

False Self-Employment Move

THE government’s introduction of new tax rules to crackdown on the false self-employment of agency workers is making contractors ‘less competitive’ when bidding for work, it is being claimed.
One in 10 construction firms (9.3%) say increased employment costs as a result of the legislation are making them less competitive when tendering for work, according to a survey of 600 construction firms by law firm Irwin Mitchell. Almost one in five businesses (18.6%) reportedly said the new rules had affected how they price work when tendering for contracts.
The new rules require agency workers to be taxed in the same way as direct employees, with agencies deducting national insurance contributions and income tax through PAYE, unless there is evidence workers will not be supervised, directed or controlled by anyone.
From April 2015, it will also become compulsory for agencies to report individuals who are not taxed as employees to HMRC, or face financial penalties.
Irwin Mitchell employment partner Chris Tutton is reportded to have warned that more contractors could be affected by cost increases as a result of the new tax rules from next year when the reporting requirements come into force.
Mr Tutton said recruitment agencies operate on tight margins and as their costs rise and reporting obligations increase. ‘We believe that the number of firms that say that these rules will impact on how they price work will grow considerably. This in turn will have a knock on impact on the competitiveness of UK construction firms.’
The new rules ‘could not have come at a worse time for construction firms’, the report says, with labour cost inflation already affecting contractors’ ability to deliver jobs at prices bid when the market was cooler.
Recruitment specialist Hays’ construction director Duncan Bullimore stated that the ‘most conspicuous’ cost increase for construction firms was the payment of national insurance contributions for agency workers.
Mr Bullimore added that the legislation could have had a more serious negative impact on individual workers’ earnings, but that it had been mitigated in many cases by wage inflation across the industry.
UCATT general secretary Steve Murphy said that where contractors were using umbrella companies to employ temporary labour, workers were having to pay both the employer’s and employees’ national insurance contributions.
‘The rate that the job is advertised for is not the rate the worker is paid, in fact highly skilled workers are now only being paid the minimum wage.’
‘Contractors should be valuing their workforce and directly employing them. This will increase productivity while also boosting safety levels and would also lead to an increase in apprenticeship rates,’ he said.

This article has been reproduced from the Contract Flooring Journal. You can find them at www.contractflooringjournal.co.uk.