Lee said: “The changing labour market, the way people wish to work, the current disparity between employment law and tax law and the complexity of these rules is causing confusion for both employers and employees. The differences between the tax rules and NIC rules add an extra dimension to the confusion.”
“The problem is that thousands of companies, and indeed potential employees, just don't know how they stand in terms of their employment obligations and rights and the tax that they will have to pay on their earnings,” said Lee.
There have been recent cases involving Uber drivers, CitySprint and Pimlico plumbers.
Lee gave an example of Uber where, in late 2017, the Employment Appeal Tribunal upheld the view of an earlier tribunal that drivers should be considered as ‘workers’ giving them certain statutory rights such as the right to a minimum wage and holiday pay.
However, the definition of ‘worker’ means that the drivers are neither employed or self-employed for employment law purposes and may or may not be self-employed for employment tax purposes (since the rules for tax are different and considered separately).
Lee explained: “As the Uber case has demonstrated, the law is not clear when it comes to an individual’s employment status. Moreover, an individual’s status for employment law purposes – i.e. which is important for determining their employment rights – is determined independently from their status for tax purposes.
“So, whilst ‘workers’ may appear to satisfy the criteria to be considered self-employed for tax purposes, this is not necessarily so and each case will need to be considered. It all makes for confusion and in many cases probably means that a potential employer will think twice about getting into a minefield about someone’s status and how to deal with it.”
Lee warned that the situation is not getting any better because of the changing labour market which now included “gig” economy workers, platform workers, those who want to work on short term contracts, those who wished to work as self-employed, contractors and zero-hour contracts.
He said: “The fact of the matter is that all of this is not helping the general jobs market with commercial demands from employees who want flexible labour. Combine this with complex tax rules that demand a different tax treatment depending on whether an individual is engaged directly, via an agency, via their own personal services company (e.g. as in the recent BBC case) or a managed service company, and you have a recipe for chaos and confusion.
“The government are looking at this and currently and have asked for comment on a consultative document (comments to be provided by 1 June 2018) which is likely to result in new legislation.
He added: “To provide clarity to both employers and employees, the government needs to better align the rules for employment law and employment tax and should make them much simpler. This is essential to maintaining a flexible and compliant labour market and avoiding many years of time consuming and costly litigation.”
A changing labour market and disparity between types of employment may be affecting job opportunities
The UK’s changing labour market and the relationship between employer and employee is causing wide-spread confusion and may even be affecting people’s employment opportunities, says Lee Hamilton, a partner at leading accounting, tax and advisory practice Blick Rothenberg.