Payroll companies
The government believes that ‘employment intermediaries’, or ‘payroll companies’ have been used to enable workers to falsely claim that they are self-employed sub-contractors when in fact they are permanent, full-time employees. This allows them to reduce their employment taxes and obligations.
Payroll companies charge for this service, typically up to £25 a week, but payments can be as much as £1,250 per year (ref. HM Treasury Overview of Legislation in Draft 10 December 2013). It has also been reported that ‘rebates’ are sometimes offered by payroll companies to contractors and agencies that use them (ref. Construction Enquirer 19 February 2014).
Legislation was introduced in the Finance Bill 2014 to prevent this by treating payroll companies as employers and so requiring that they subject workers to tax and employee National Insurance Contributions (NICs) deductions at source and introducing a new liability to pay employer NICs.
These new measures came into effect on 6 April 2014.
It is considered that this will have the greatest impact on the construction sector, where around 200,000 workers are thought to be employed through onshore employment intermediaries. These workers will face higher tax and NICs liabilities, but will no longer be paying service charges, will gain statutory payments such as statutory sick pay and maternity pay, some will be eligible for the national minimum wage and they may become eligible for other employment rights.
There is criticism in the industry that this measure will burden contractors with extra costs at a time when the economic recovery is still very fragile. It has also been claimed that labour costs could rise by 25% and that this will hit sub-contractors on fixed-price contracts very hard (ref. Construction Enquirer 20 February 2014).
In 2018, An employment tribunal ruled that payroll company Hudson Contract Services was a effectively a contractor and so liable to pay the CITB levy. Hudson twice appealed the ruling but was refused on both occasions. On 10 March 2020, Appeal Court judge Lord Justice Underhill said; “Hudson is after all a sophisticated form of labour-only subcontractor, on terms that remove risk in relation to construction activity.”
[edit] Related articles on Designing Buildings Wiki
- Construction industry scheme.
- Gangmaster.
- Good Work Plan promises clearer contracts, fairer rules
- Hourly rate.
- IR35.
- IR35: essential steps for compliance.
- Mixed partnerships.
- Non-productive overtime.
- PAYE.
- Personal service company.
- TUPE Regulations.
- Umbrella companies.
[edit] External references
- HM Treasury Overview of Legislation in Draft 10 December 2013.
- Construction Enquirer 19 February 2014.
- Construction Enquirer 20 February 2014.
Featured articles and news
Electrotechnical excellence, now open for entries.
Net zero electricity grids BSRIA guide NZG 5/2024
Outlining the changes needed to transition to net zero.
CIOB Global Student Challenge 2024
Universitas Indonesia wins for second year running.
New project and cultural district described in detail.
The nature of EPCs, crticism and inaccuracies.
History, issues and redesign.
From waste recycling to energy performance the hierchy.
An introduction to WERCS and WEEE responsibilities
Dealing with 2 million tonnes of waste equipment a year.
Global BACS Market: analytics and optimisation
A BSRIA glance at building automation and control systems.
What it is and how to use it.
Types of insulating plaster by binder and insulant.
Investors in People: CIOB achieves gold
Reflecting a commitment to employees and members.
Scratching beneath the surface; a guide to selection.
ECA 2024 Apprentice of the Year Award
Entries open for submission until May 31.
UK gov apprenticeship funding from April 2024
Brief summary the policy paper updated in March.
For the World Autism Awareness Month of April.