The UK government has issued a consultation which sets out proposals for effective enforcement of agency and gig workers' rights, and suggests areas where agency workers will have more rights.
At the same time, the Office of Tax Simplification ("OTS") has published a note confirming that it will carry out work over the Summer of 2019 to consider options around information reporting and paying tax in or closer to real time (or through some form of withholding similar to that under the CIS) for the self-employed. OTS will publish an initial paper on this in the autumn which could then be followed by a more extensive review. Developments in this area will be of interest to platforms who engage, supply and/or pay self-employed gig workers.
This picks up some of the proposals in the government's Good Work Plan (published in December 2018) which sets out some suggestions to give agency and gig workers more rights and better protection following Matthew Taylor's review of modern working practices.
So what does the consultation suggest?
- Centralised enforcement body: There will be a single organisation responsible for enforcing agency worker rights to replace the many bodies currently tackling enforcement including HMRC's NMW enforcement unit, GLAA, EASI, HSE etc., (who have developed piecemeal over time). It will be simple for workers to make a complaint, and they will have a body which will follow it up for them.
- Proactive enforcement: many worker rights including holiday pay and sick pay currently rely on individuals understanding their rights and bringing claims in the Employment Tribunal or raising complaints with the relevant enforcement bodies. The proposals outline a move away from assertion of individual rights to proactive, joined-up enforcement by a centralised enforcement body.
- Holiday pay and sick pay will be enforced in the same way that NMW is currently enforced by HMRC, which means that companies will need additional procedures to ensure compliance and will face significant disruption if they get it wrong.
- Easier for regulator to impose bigger penalties?: It will no longer be necessary for enforcement bodies like EASI to go to the trouble of bringing criminal prosecutions. The new enforcement body seems likely to have powers to impose potentially very large civil liabilities in many more areas than just National Minimum Wage enforcement (where HMRC have been much more active recently, leading to some very extensive investigations at some large companies).
- An end to staffing companies hanging on to unclaimed holiday pay? There maybe administrative fines for companies which hold on to holiday pay for agency workers who never claim holiday.
- Hot goods? There may be a hot goods regime for end user companies who use exploited workers (preventing them from selling goods made by exploited agency workers).
- Licensing regime? There may be an extension of the GLAA licensing regime to sub-sectors like construction, care and contract cleaning (not just food-processing and agriculture).
- Will this indirectly end aggressive tax avoidance schemes? The GLAA enforcement culture, involving rigorous action against staffing companies which breach regulatory and tax requirements and imposition of bans, is likely to set the tone for enforcement of rights of agency workers in these sub-sectors. Will the threat of the loss of a licence eradicate more aggressive tax avoidance schemes in those sectors?
- A level playing field for umbrellas? The new enforcement body is likely to have powers over umbrella companies. Might they in due course be subject to a licensing regime as suggested earlier in the Matthew Taylor process? Might that eradicate promoters of aggressive tax avoidance schemes?
- End user skin in the game? In addition to their Modern Slavery obligations (which may increase), end users may be made liable for what goes on in their supply chains, as suggested by Sir David Metcalf. Will this stop major users of agency workers saying that they expect suppliers to comply, but then forcing down rates and margins to a level which can only work if suppliers cut regulatory and tax corners?
These proposals go hand-in-hand with other recent steps towards ensuring the rights of everyone in the modern workforce are equally protected. The net is starting to close around some end users and staffing companies turning a blind eye to workers' rights – whether through their own conduct or through overlooking breaches in their supply chains. On 11 July 2019, HMRC published draft legislation setting out the IR35 reforms to come into force on 6 April 2020, affecting users and suppliers of personal service company contractors in private and public sector situations. With the same aim of creating clear accountability, the IR35 proposals ensure that whoever fails in their obligations will be liable. This is good news for compliant employers and suppliers who have previously lost opportunities to those offering cost-savings borne by non-compliance and the government's intention is that the enforcement proposals contained in this new consultation will similarly create a more level playing field between businesses.
What should staffing companies and end users be doing now?
The consultation closes on 6 October, giving much to think about in the meantime, in view of the significant changes proposed. Whilst the enforcement proposals are clearly aimed at introducing tougher consequences for end users and staffing companies who ignore agency workers' rights, with continually evolving case law and the complexity of compliance, end users can easily find themselves inadvertently in breach. Any such breach will cause businesses major disruption and can lead to substantial financial losses. These are business critical risks.
One of the government's main aims is greater awareness and access to worker rights and it is inevitable that agency workers and other flexible workers will have a greater awareness and will therefore make more claims. Now is therefore a good time to take stock and identify any areas of concern and take steps to address them. End users should focus on reviewing not only their own compliance but that of their staffing supply chains (such as the use of umbrella companies and any personal service company arrangements) as end-users are becoming increasing liable for breaches further up their supply chains.