False self-employment in the UK construction industry – why tax regulations are putting the horse before the cart.

There’s been a lot of work by the government in recent years looking at false self-employment in the UK construction sector.  The driver for this work has always been that the government misses News Stories 17-03-2014out on, somewhere in the region of, £1.7 billion in revenue and therefore clamping down on what is perceived as a ‘fraudulent bunch’ is seen as the solution.

For those that don’t know, false self-employment is where someone is classed as self-employed and therefore has all the risk associated with running a business, but does not have any of the gains. For example, they would not be able to have someone else do their work on their behalf, nor could they decide whether or not to undertake work, determine their own hours or negotiate separate payments. What makes this situation damaging is that they also don’t have the protection afforded to the employed workforce with regards to holiday pay, sick pay, employment rights or retirement pay.

In 2009, the last time the government acted on this issue, it could be argued that they succeeded in doing little more than making the whole situation a lot worse. Instead of protecting the workforce it succeeded in starting up a multi-million pound industry that charged individuals £15 – £25 pound per week extra.

UCATT has done some great work around this area and I would urge you to read it.

For now though, I want to talk about how this situation affects individuals and how, in turn, that is impacting on the sector.

In our work with the industry we have identified three main types of false self-employed people (remember – if you are self-employed and have the opportunity to turn down work, fix your own price or subcontract your works, we are NOT talking about you): –

 

“It’s just the way it is, you can’t change the sector”

Many people are resigned to the fact that this is just how the industry operates. Quite often these individuals are unhappy with the situation but don’t see another alternative and so accept it.

“It’s ridiculous; I don’t think I’ll be in the industry much longer”

Many new entrants to the industry expect something better, and are often appalled when they learn that they will be taking a reduction on an already low wage. Unfortunately, many of these individuals already have plans to ‘up sticks’ to a different sector once we come out of recession.  I find it rather worrying that we are losing people who have the capability of identifying negative employment practice – surely these should be people we fight to keep?!

“I like being self-employed, it gives me more flexibility”

‘Hegemony’ is a useful word – it means oppression by consent, and whilst I believe it will upset a few people to levy it here, it needs to be said. Often the problem with false self-employment is that people do not really understand what it means. There is something psychologically satisfying about being self-employed – I won’t deny that for a second. We have to start appreciating that a large part of the reason we now have so much false self-employment is because there are a large group of people that believe this is what is best.

This conversation we had with a roofer explains the situation: –

ME: Are you employed or self-employed?

Roofer: Self-employed.

ME: How long have you worked with just this company?

Roofer: Over 25 years.

ME: Would you like to be fully employed?

Roofer: No I like knowing I can leave when I want

ME: Do you have to give notice at the moment?

Roofer: Yes – one month.

This is a conversation that we have had many times. What it highlights to us is that there is a misunderstanding around what it really means to be employed by a company. We agree that companies also need to be educated to see the longer term benefits of an employed workforce, but we do need to understand that over the years a pride and identity has formed around the idea of a self-employed status – even if that not what it really is.

Why should we care? If we are not bothered about basic employment rights perhaps then we should consider the bottom line – if current practices are driving away new entrants who are cute enough to see past the hegemony, we are often left with only those who have no other choice than to accept these terms. This means that we are driving the industry towards an apathetic and unengaged workforce which will affect your bottom line. With regards to diversity, false self-employment is much more suited to the average white male for a number of reasons (which if you request it we will detail for you), so we will likely not move any further with this agenda either.

The solution? Education helps people to understand the real benefits by showing bottom line figures of how much better individuals would be over a year, how much companies would have to gain over 3 years and what the sector could look like if a return to employment was something we adopted across the sector. I know transient labour is an issue, but that is not an excuse for keeping all trade staff as self-employed, especially if they have worked solely for one company for over 3 years.

The industry has a great power in that it can make people find acceptability and pride in even the most dire of situations. I will admit to falling into similar traps myself, such as believing that 70 hour working weeks (without overtime) were acceptable, or that in order to prove myself I should be able to accept any behaviour directed at me. I would suggest that if we changed the way we treated people in the industry we would find that we empowered, educated and protected our workforce which would benefit all parties immensely.

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