Independent Review of Employment Practices in the Modern Economy
LITRG has been hugely concerned about the impact that ‘non-standard work’ such as agency work, zero-hours contracts and self-employment has on the low-paid for some time, particularly with regards to their tax, National Insurance (NIC) and tax credit positions. While we appreciate that such matters are not expressly within the terms of reference of the Matthew Taylor review, we note that ‘security, pay and rights’ are. In our view there is much overlap – one cannot understand what impact modern employment practices have on a worker’s security, pay and rights, without considering tax, National Insurance and tax credit issues.
We say this for reasons which include the following:
- minimising or avoiding tax or HMRC administration is often a factor in terms of employers offering non-standard forms of work over full-time, permanent, direct employment.
- not only can this make worker’s lives miserable but there is a huge knock on effect on public finances – both direct and indirect. It follows that we may see erosion of the social safety net in the longer term due to potential funding issues – something of concern when considering a worker’s ‘security’.
- regardless of what action is taken around employment law status as a consequence of this review, the fact remains that the distinction between employment and self-employment for tax purposes is an ongoing source of confusion and trouble for workers.
- statutory payments such a sick pay or maternity pay, often thought of as employment law ‘rights’ are dependent on whether there is a ‘secondary contributor (i.e. someone that pays Employers National Insurance). This demonstrates the overlap that exists between employment law and tax law when thinking about ‘rights’.
- a person’s tax credits or universal credit status usually follows their tax status, so if a person is treated as self-employed for tax purposes, then this means they are likely to be treated as self-employed for tax credits or universal credit purposes. The rules for the self-employed tend to be less generous/more burdensome than for employees.
Taking all of these things into account, we think that one of the recommendations coming out of this review should be that tax and related issues around non-standard work are debated as a matter of urgency. We suggest that the above areas feature as key themes.
Another recommendation is that of a ‘default’ worker status (i.e. that individuals are treated as ‘workers’ unless the engager of their labour can prove otherwise). From people who write into our website we know that ‘workers’ are often not aware of their employment status and therefore what employment rights they are entitled to. By essentially reversing the burden of proof regarding ‘worker’ status, some of these issues will hopefully start to melt away.
The LITRG response can be found here: Independent Review of Employment Practices in the Modern Economy – LITRG response