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Government should delay onshore employment law changes, recruiters say

March 13, 2014  /   No Comments

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Recruiters are warning the Chancellor George Osborne that changes to the laws on self-employed workers using employment intermediaries could damage job creation and economic growth.

The REC and the PCG, the membership organisation for freelancers, are calling on the government to delay the implementation of the proposals laid out in the recent Onshore Employment Intermediaries consultation.

The proposed legislation aims to recover tax revenue by removing the obligation to prove workers must provide services personally, instead focusing on whether a worker is subject to supervision, direction and control by an organisation.

Additionally, if UK-based placements operate UK assignments as employees of an offshore umbrella company, and that ‘employer’ fails to account for UK tax and national insurance contribution due, the recruiter will be held accountable as the UK intermediary contracting with the UK client.

The changes would mean agencies would need to take a typical self-employed worker onto their direct payroll, which would introduce a 13.8% employer NIC cost, increased employee NICs and income tax liabilities, and other statutory payments including VAT. According to the REC, this would mean a compliant agency is looking at a minimum 25% cost increase for the supply of labour.

Agency giant group said that the construction, driver and hospitality sectors will be hardest hit by the legislation.

“There are huge unquantifiable financial risks for agencies and very onerous quarterly reporting to HMRC,” said managing director Matthew Brown. “The temporary, contract and self-employment sector will now have to adopt new administrative processes to ensure they are compliant with the new legislation. This will understandably impact a recruiter’s time.”

The draft legislation was “sprung on businesses at very short notice”, according to Kevin Green, REC’s chief executive. “There is now less than a month to go before the new rules would come into effect and the government still hasn’t published its final guidance for employers,” he added.

“This scramble to implement shows a lack of understanding about how business works and the complexity of contracts for long-term projects. If these changes are rushed through they risk having a negative impact on job creation and growth in sectors that are vital for the recovery of the British economy.”

Director of policy and public affairs for PCG Simon McVicker added that throughout the consultation process, HMRC has gone to great lengths to assure the recruitment sector that limited company freelance businesses are not the intended target of the Onshore Employment Intermediaries legislation.

“However PCG believes that HMRC guidance on this does not offer freelancers the guarantees they seek,” he added. “It needs to be clearly stated in the proposed legislation or the danger is that it will create confusion amongst business, leading to the legislation being wrongly applied to genuine freelancers using limited companies.

“Delaying its implementation will ensure that the legislation is well understood, well drafted and clear.”

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  • Published: 10 years ago on March 13, 2014
  • Last Modified: March 13, 2014 @ 8:10 am
  • Filed Under: News, Weekly Bulletin

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