Opportunity for true reform

PRISM's response to government

Opportunity for true reform

UK & Europe

Following the release of the government’s ‘Good Work’ plan (as its response to the Taylor Review) PRISM, the trade association for payment intermediaries, is encouraged that the government has finally acknowledged that the issues of employment and tax are intrinsically linked: ‘The consultation will consider employment status for both employment rights and tax, including considering the review’s recommendation for greater alignment between the two, in order to tackle this issue holistically.’

PRISM has always maintained that the current tax system provides a financial incentive to mis-classify workers and has led to the recent rises in zero hour contracts.

What is very disappointing is that, whilst recognising this important link and driver, the government consultation into employment status will not also consider changes to the rates of tax, NICs or reliefs.  Crawford Temple, CEO of PRISM, believes this is a huge missed opportunity: ‘The independent report commissioned by PRISM from The Social Market Foundation highlighted that policymakers need to consider the more subtle forms of arbitrage such as thresholds that apply to Employers NICs.  We hear many stories where firms are limiting workers’ hours and looking to engage 2 or 3 workers on zero-hour contracts rather than one full time employee. This approach provides significant savings to the employer. Until these incentives are removed it will be difficult to fully understand the true size the issue, or whether there even is an issue.’

 

This view appears to be supported by The Low Income Tax Reform Group with Anne Fairpo commenting ‘better still would be to remove the incentives for exploitation. It often seems to be the desire to save tax, and employers’ NICs, that leads to false categorisation of workers and much of the labour market abuses that the Taylor Review attempted to deal with.’

John Cullinane, tax policy director at the Chartered Institute of Taxation also commented that by refusing to consider changes to NICs the government are denying themselves many of the tools they need to tackle the issues Taylor identified around employment status.

The government has also recognised the need for transparency in the labour market, a view shared by PRISM. Crawford Temple commented ‘Umbrella companies have to work with the rates agreed with recruitment companies on assignments. It is true that in some cases a lack of transparency has resulted in worker confusion. We worked with the Low Income Tax Reform Group to provide a document to help workers using umbrella companies to understand their rights and pay. We have been encouraging all providers and recruitment companies to issue this to their contractors. We would be interested in exploring further steps that can be taken to bring further transparency to the market.’

With 4 consultation papers released covering: Consultation on agency workers, Employment status, Enforcement of employment rights and Measures to increase transparency in the UK labour market it would also seem logical that any consideration of an extension of the off-payroll rules to the private sector will be held back until a clear outcome has been decided.



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