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Construction firms affected by new ‘false self-employment’ rules

After a whirlwind consultation period from December 2013 to March 2014, the government introduced significant new rules which require agency staff to be taxed as employees - unless the employment agency has evidence that the worker will not be supervised, directed or controlled by anyone.

In essence this has meant that for the last six months, agencies have been required to put these workers on the payroll, deduct National Insurance Contributions and operate PAYE as though they were employees.

It is estimated that around 200,000 workers in the sector have been affected and given the industry’s reliance on agency workers, we wanted to analyse the industry’s awareness of these rules whilst also investigating the impact on labour costs.

We recently conducted the research amongst 600 construction firms of varying size ranging from under 100 employees to over 500 to see where the industry is six months on, and also what might be around the corner when in another six months’ times, further changes will be made.

At this point it will become compulsory for employment agencies to report individuals that are not taxed as employees to HMRC or face financial penalties.

Speaking to senior decision makers, it’s clear from our research that construction firms and employment agencies appear to be still getting to grips with the changes.

Crucially however there are also signs that the costs are being passed on and starting to have an impact on competitiveness.

We believe understanding and adapting to these rules is a critical issue for construction firms and employment agencies and we would urge such businesses to consider the impact of the rules on their organisation.

This survey has revealed that 10 per cent of construction businesses already believe that they have become less competitive as a result of these new laws.

Although the sector is performing strongly, it is vital for the UK economy as a whole that the sector is fully aware of these regulations and deals with them effectively.

Chris Tutton is head of employment, London at Irwin Mitchell LLP

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