Peter Naylor argues that workers and firms would benefit from keeping the flexibility that self-employment provides
THE CLAMPDOWN on bogus self-employment has received considerable coverage in the media in recent months. But so far little has been said to reflect the genuine concerns of workers traditionally known as '714s' or 'SC60s'.
The much-publicised clampdown by the Inland Revenue and Contributions Agency last April has prompted some people in the industry to argue that the writing is on the wall for self-employment as a whole.
This view appears to be reinforced by new regulations due to come into force next April aimed at closing the 'loophole' that allows agency-registered workers to claim they are self-employed for tax purposes.
These new regulations should not be seen as a threat to the industry, but as an opportunity, especially for those workers who wish to remain independent. There are vast numbers of genuine self-employed workers who would like to keep this independent status because of the flexibility it offers, not because it offers an opportunity to dodge tax payments.
It is not their fault that the industry has been unable to sustain full employment. Yet now many are faced with a cruel choice: go on to the books or be sacked.
In addition, the big contractors with substantial turnovers find it easier to maintain a stable workforce than smaller firms. But it is the latter kind of firm, and subcontractors, which employ the men who are the backbone of the industry. Self-employment provides the flexibility for such firms to operate successfully.
Speaking from a long experience in the industry, both at project manager, director and managing director level, the days of large infrastructure projects are long gone and average contract values are now often so small that it is difficult to maintain an adequate workload to provide for overhead cover and profit.
The solution is for contractors and sub-contractors to deploy self-employed workers through an
approved employment agency that engages them through a 'contract for services'.
Such agencies should, preferably, be members of the recruitment industry's regulatory body, the Federation of Recruitment and Employment Specialists.
At present, they are required to have their own 714 certificates, which enable workers to remit their own tax under the new self-assessment rules. With the SC60 worker, the basic rate of tax is
remitted by the agency directly to the Inland Revenue.
Even the introduction in 1999 of the New Construction Industry Deduction Scheme, which will set an - as yet unspecified - turnover test for self- employed workers, should not be allowed to threaten self-employment.
Agencies can play a positive role for the industry and government. They can, for instance, assist with the timely collection of dues to the Inland Revenue and Contributions Agency.
Agencies would also enable contractors and workers to concentrate on running their businesses without worrying about the next unannounced visit from the Inland Revenue or Contributions Agency officer.
The Leader of the October 2 edition of Construction News identified that it is time for the current policy to be rethought - and quickly. A 'win- win' position needs to be found whereby companies and workers alike may prosper. The role of bona-fide employment agencies can facilitate this.
There are many benefits to be had from genuine, as opposed to bogus, self-employed workers.
A combination of self-employed workers engaged through agencies alongside PAYE workers would provide better prices for contractors and better pay for the industry's workers. It would also provide a firmer control mechanism on the collection of tax and National Insurance, without the trouble of recruiting extra tax officers and special units and increasing the number of raids.
In particular, such flexibility would assist in providing a level playing field for those smaller contractors who are providing sub-contract packages to the larger ones. Without this the worker will continue to suffer, while tenders and contract prices will increase without the benefit of any efficiency savings and increase in profits.
The use of an approved recruitment agency with an approved 714 cert-ificate already facilitates this practice.
It is a legal and bona-fide way forward and an alternative to the problems arising from companies or workers seeking to fiddle their way through the complexities of the industry's tax exemption scheme or, what is worse, inventing hybrid schemes which have no proper basis in law.
The change of direction would have a major benefit for contractors and, more importantly for
the workers, who should be respected for their skills and capability to influence the success of the industry.
Without such a 'win-win' scenario, the bogey man of lump labour will not disappear.
Peter Naylor is an independent business consultant