An employment law expert has predicted that calls from The Resolution Foundation think tank to re-classify low-paid self-employed people as workers and grant them wage protection will lead to the consolidation of agency work as the preferred model of engaging flexible labour.
Christopher Tutton, partner at the specialist employment and business immigration law organisation Constantine Law, told Recruiter that in the event of the Government acting on the think tank’s recommendation, agency models would rise dramatically in popularity among employers as the preferred means of engaging flexible workers, trumping gig models in the process.
The Resolution Foundation has submitted its recommendation to the Taylor Review on modern working practices, drawing attention to the fact that around half of the 4.8 million people currently classified as self-employed in the UK earn below £310 per week.
Mr Tutton’s comments about agency work are equally applicable to engagement through Umbrella Companies. Both models, as he puts it, remove major differences between employment and self-employment, a benefit that he believes will “drive people out of the gig economy” in favour of this model of engagement.
Currently, he explained, gig economy companies can make major savings on National Insurance by designating their workers as self-employed, paying them simply gross and leaving them to sort out their own tax affairs. He continued: “But if they are going to be classified as workers instead, with wage protection, then you have a direct contract with that individual; they have enhanced rights, you have to pay NI Contributions – they have more protection and they can sue [employers] directly.
“Why would you then carry on with that model instead of engage agency labour, as it’s flexible and the agency manages all of the payroll and engages people as workers?”
This is, of course, precisely what Umbrella Companies do, as well as ensuring that contractors receive all statutory benefits, including paid sick leave, paid holiday leave, pensions auto-enrolment and maternity/paternity leave.
The Association of Independent Professionals and the Self-Employed (IPSE) welcomed measures to support low-paid self-employed people, but its Director of Policy, Simon McVicker, emphasised that important obstacles need to be tackled first.
A statutory definition of self-employment, he said, would in itself protect low-paid contingent workers from exploitation by unscrupulous employers who “get away with shirking the responsibilities they have to their staff by wrongly calling them self-employed contractors.”
A statutory definition would clearly delineate the true characteristics of self-employment: setting one’s pay rate, having autonomy over one’s work, controlling one’s working arrangements and maintaining independence from clients. When these determining characteristics are absent, workers should be designated as employed and eligible for the National Minimum Wage.