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Kermode: “Government isn’t committed to tackling worker exploitation”

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A strategy to stamp out worker exploitation has been published by the government but IR35 and contractor industry experts don’t hold out much hope that the government will implement recommendations

Experts have responded to the publication of the Labour Market Enforcement Strategy, which includes proposals to prevent the exploitation of workers in the UK.

Contractors and temp workers who are employed and paid through umbrella companies should expect more delays from the government to act on promises to clamp down on the unregulated umbrella industry.

Delays mean workers will remain at risk

Any worker who has been asked to be paid through an umbrella company by a client or recruitment agency puts themselves at risk for non-compliance when it comes to the correct amount of tax being paid to HMRC. For example, there have been multiple cases of umbrella companies providing workers with inaccurate information about the amount of tax they must pay HMRC or the amount the umbrella tells the worker they will take out of a worker’s pay cheque and then pocket that amount instead of paying HMRC.

The Freelance Informer has reported that the government is aware of such behaviour and the plight it puts workers in and how HMRC has the data to crack down on non-compliant umbrella companies, but often goes after the workers instead.

“While this long-awaited strategy focuses on the key issues impacting workers – in particular, the proliferation of tax avoidance schemes posing as umbrella companies – how many of these proposals will be implemented remains to be seen,” says Julia Kermode, CEO of umbrella company compliance specialist, PayePass.

Seb Maley, CEO of employment status expert, Qdos, is of a similar opinion: “This strategy makes clear that the government understands that the ambiguous nature of employment status is leading to challenges, both for workers and businesses. But it also spells out that Westminster has no intention of solving these issues any time soon – arguing that the benefits of creating a new employment status framework are outweighed by the disruption it may cause.”

It’s time to put an end to injustice

Kermode indicates concern that the strategy has taken seven months to publish, which leaves just a couple of months for the recommendations to be implemented by April 2024.

“You can sense the frustration of Director of Labour Market Enforcement, Margaret Beels, who quite rightly expected more support from the government, which is to blame for this ridiculous deal,” says Kermode.

She continues, “Continually kicking the can down the road on key issues such as umbrella industry regulation and failing to ensure the UK’s 1.6m temps receive holiday pay tells you everything you need to know. The government isn’t committed to tackling worker exploitation and ultimately, it’s workers who pay the price of this startling lack of action.”

Maley says when it comes to reform, there’s an urgent need to align employment status with tax status.

He says, “It would put an end to the injustice that is zero rights employment – which occurs when a contractor is placed inside IR35, where they are taxed as an employee but don’t receive any employment rights in return.”

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