Empowering the Freelance Economy

What could fixed-term contracts look like under a Labour Government?

General Election campaigning, Southampton, United Kingdom - 17 June 2024 Keir Starmer, leader of the Labour Party, and Rachel Reeves, Shadow Chancellor, speak with workers at Ocean Gate container terminal at Southampton docks. Picture date: Monday June 17, 2024./Flicker
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What Contractors and Freelancers Need to Know

The future of fixed-term contracts under a Labour government would likely be influenced by the party’s historical stance on workers’ rights and its current policy proposals. Labour typically prioritises strengthening workers’ protections and ensuring fair employment practices. Here are some potential changes and initiatives that could be expected:

1. Enhanced Workers’ Rights and Protections

Labour governments have traditionally sought to bolster workers’ rights. This could include tighter regulations around fixed-term contracts to prevent abuse and ensure that workers on such contracts have similar rights to permanent employees.

2. Limitations on Use of Fixed-Term Contracts

Labour might introduce policies to limit the use of fixed-term contracts to situations where they are genuinely necessary, rather than as a means to circumvent providing permanent employment benefits. This could involve stricter definitions of what constitutes a legitimate fixed-term contract.

3. Conversion to Permanent Contracts

Policies could be introduced to make it easier for fixed-term contract workers to transition to permanent positions. For instance, after a certain period of continuous employment, workers might automatically be entitled to permanent status unless there is a valid reason for maintaining a fixed-term arrangement.

4. Strengthening Enforcement Mechanisms

The enforcement of existing regulations regarding fixed-term contracts could be enhanced. This might involve more rigorous inspections, penalties for non-compliance, and resources to help workers understand and assert their rights.

5. Support for Contract Workers

Labour might introduce or expand support mechanisms for workers on fixed-term contracts, including access to training and development, career progression opportunities, and financial security measures. However, there is nothing earmarked in the manifesto for funding such initiatives.

6. Union Empowerment

A Labour government is likely to support trade unions in their efforts to protect workers on fixed-term contracts. This could include measures to facilitate unionisation and collective bargaining for temporary workers. However, portfolio contractors and freelancers may want to avoid being lobbed into the same worker category as temp workers, which could change their self-employed status freedoms and tax bands.

7. Legislation and Policy Changes

Potential legislative changes could involve revising or introducing laws that specifically address the rights of fixed-term contract workers, ensuring they receive equitable treatment in areas such as redundancy pay, leave entitlements, and workplace benefits.

8. Consultation with Stakeholders

Labour may engage in extensive consultations with stakeholders, including employers, trade unions, and advocacy groups, to develop policies that balance the needs of businesses with the rights of workers.

9. Focus on Job Security

A broader emphasis on job security and reducing precarious employment could see Labour pushing for more permanent, full-time jobs across various sectors, reducing reliance on temporary and fixed-term contracts.

10. Impact on Freelance Economy

Labour is likely to address the gig economy, where fixed-term and temporary contracts are common. Policies aimed at improving conditions for gig workers could overlap with efforts to reform fixed-term contract regulations.

Additional Considerations for IT Contractors and Freelancers

Tax Avoidance and Umbrella Company Fees

Many IT contractors and freelancers use fixed-term contracts and often work through umbrella companies, which handle payroll and taxes. Labour’s focus on closing tax avoidance loopholes could result in stricter regulations on umbrella companies to ensure fair treatment and transparency. This might reduce the hidden fees often charged by these companies, providing more financial clarity and security for contractors.

However, there is also talk of coming down hard on small business owners and giving HMRC more powers and funding to go after small businesses, whether they have been found out to have committed tax avoidance or not.

The Observer has reported how HMRC has failed to charge a single company under new laws passed to crack down on corporate tax evasion. Figures published last year also revealed the number of HMRC investigations that result in prosecutions had fallen by two-thirds in since 2018.

Dave Chaplin, CEO of Contractor Calculator, has voiced his concerns about HMRC not using the data it has at its disposal to shut down tax avoidance schemes, so will HMRC change its ways under Labour?

IR35 and Off-Payroll Working Rules

The IR35 rules, which aim to prevent tax avoidance by workers supplying their services to clients via an intermediary, such as a personal service company, would likely be a key focus. Labour could seek to refine these rules to ensure they are fair and not overly burdensome. Additionally, off-payroll working rules, which apply IR35 to the private sector, might be reviewed to balance preventing tax avoidance with supporting legitimate freelance work.

Lack of Regulation

The Labour government may address the lack of regulation in the contracting sector, introducing more robust frameworks to protect freelancers from exploitative practices. This could involve ensuring fair pay, job security, and benefits comparable to those enjoyed by permanent employees. However, as previously stated freelancers and small business owners could be in the spotlight but not in a good way if Labour takes a similar approach as the Conservatives did towards the solo self-employed.

These potential changes align with Labour’s broader goals of ensuring fair treatment for workers and reducing employment insecurity. However, specific policies would depend on the party’s manifesto commitments and the legislative environment if they come into power.

Have you read? Pros and cons of political party policies affecting self-employed and agency contractors – Freelance Informer

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