Empowering the Freelance Economy

Will a bonus or Cost of Living pay-out put freelancers in hot water with HMRC?

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Some contractor recruitment agencies, such as Andrew Construction Recruitment (ACR), believe self-employed contractors deserve a Cost of Living pay-out to make ends meet. Such agencies are following the leads of those influencing their industry. In the case of ACR that’s been the likes of house builders Taylor Wimpey and Barratt, which have awarded staff £1,000 each to help pay for soaring fuel bills.

ACR owner Andrew Fowler told Construction Enquirer in a report that he believes temporary staff are often forgotten when it comes to financial aid and recruitment agencies should step in to help. All temporary workers who have worked for ACR for at least 12 weeks during the course of the last year will receive a £250 cost of living support payment in September.

Fowler told the news service: “At Andrew Construction Recruitment we have a significant bank of white-collar contractors whose dedication and commitment to the construction profession is exemplary.

“Their flexible approach to work can be incredibly beneficial to construction companies experiencing fluctuating workloads. We value them and we value the important part they play in helping our business thrive.

“We are now seeing many businesses offer their staff one-off cost of living payments or bringing forward pay reviews to help with the pressures of inflation and rising energy bills.”

But can all self-employed freelancers and contractors accept such generous offers without getting in hot water with HMRC? The Freelance Informer asked contractor insurer Qdos’ CEO, Seb Maley, for some guidance.

Which self-employed workers can accept a bonus/pay-out (IR35) based on the ACR example?

“It’s an interesting and unique strategy from the agency, which is bound to garner some attention,” says Maley. “Generally, anyone operating as self-employed should avoid any ‘bonus’ payments from those they contract with if they relate to performance,” he says.

He continues, “Performance-related bonuses would be expected in an employment relationship, rather than an agreement between two independent parties. This particular ‘bonus’ clearly isn’t linked to performance, but care should still be taken with terminology so as not to muddy the water from an employment or IR35 status perspective.”

Will we see recruitment agencies in other industries such as IT, engineering, healthcare, etc. follow this trend?

“While this ‘cost-of-living bonus’ has no doubt been welcomed by these self-employed workers, I’d be surprised if it became common practice,” says Maley.

“Not only will agencies need to tread carefully to avoid any problems regarding employment and IR35 status, but given how stretched many businesses are right now it seems unlikely that many will have the financial means to support independent workers,” says the CEO.

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