Specialists raise concerns on applying ‘exploitation’ term to professional freelancers

Neither the anti-tax avoidance red flag of the UK’s off-payroll working rules nor umbrella companies surfaced in the King’s Speech yesterday [17 July 2024].

Nevertheless, experts in flexible workforce policies and contractor payments are raising concerns about how the term ‘exploitation’ will be applied to professional and freelance workers who choose to work for themselves.

The new government has promised to ban zero-hours working and to introduce “a new deal for working people to ban exploitative practices” and create a Fair Work Agency, which some expect to be the long-heralded Single Enforcement Body that will strengthen enforcement of workplace rights. 

Flexible workforce specialist Matt Fryer, managing director of Brookson Group, said: “An important consideration would be ensuring any ban on zero-hour contracts retains the flexibility enjoyed in the contracting section. The plan does refer to the banning of ‘exploitative’ zero-hour contracts, so does point towards this being a targeted rather than a blanket measure. A blanket ban would have unintended problems for independent contractors and freelancers.”

Fryer went on to say: “It is good to see the plan to establish a new Single Enforcement Body, also known as a Fair Work Agency, to strengthen enforcement of workplace rights. I would expect this body to be responsible for regulating umbrella companies, perhaps also incorporating the currently established Employment Agency Standards Inspectorate. 

“While there was no mention of the regulation of umbrella companies in today’s announcement,” Fryer added, “as it’s an existing policy measure which is currently under consultation, one would assume that this will continue to be worked on and rolled out.

“I also welcome the announcement to reform the Apprenticeship Levy. The current scheme does not work for the flexible labour market as temporary recruitment agencies and umbrella companies find it difficult to use their Levy funds to provide access to funded training to their employees.

“There was no mention of a review of the off-payroll (IR35) rules, which is not surprising given that it wasn’t a policy area referenced in the Labour manifesto.”

Jake Shepherd, senior researcher at Social Market Foundation, addressed the promised Employment Rights Bill, saying: “The Employment Rights Bill sets out to ban exploitative practices and enhance job security, and today’s announcements underscore the new government’s commitment to those goals. Measures such as the ending of ‘fire and rehire’, strengthening parental leave and sick pay, encouraging trade union activity and flexible working were all expected, but are no less welcome.”

He added: “The eye-catching part is the ban of exploitative zero-hour contracts. This is serves as a strong demonstration of [Prime Minister] Keir Starmer’s commitment to workers’ rights and to trade unions, which have long opposed this form of low-rights, low-pay work. Some may call this move extreme: some gig jobs work well, and there are, no doubt, many workers who are happy with this kind of working arrangement. 

“A consequence of this may be reduced flexibility in the labour market, which would come at the detriment of some workers. The government has compensated for this by introducing mandatory flexibility in all forms of work – only time will tell if this approach strikes the right balance,” Shepherd said.

Dave Chaplin, CEO of contracting authority ContractorCalculator, commented: “While protecting vulnerable workers is important, what does getting rid of ‘exploitative’ zero-hours contracts mean, as many people are engaged on a payment-for-work-done contract, which is a zero-hours contract in essence?

“Legislation is not the answer,” Chaplin emphasised. “Any definition of ‘exploitative’ in statute isn’t possible. We’ve heard of some proposals to give workers the right to guarantee hours after certain thresholds are met – but, so what? The easy fix to turn bogus zero-rights contracts into ones for guaranteed hours is to increase the minimum wage for zero-hours-based work. Hirers who then want to carry on paying the same and can offer guaranteed hours just move to new contracts. A 20% difference would produce the necessary behavioural effect needed to generate more secure work.”

Chaplin continued: “Banning zero-hours contracts glosses over the nuanced realities of today’s modern employment landscape. Whilst such contracts are open to potential abuse which must of course be tackled, when used properly, zero-hours can provide flexibility for both businesses and many workers.

“And let’s not forget that zero-hours workers are just part of the picture and these workers are just one sector of a wider group of flexible workers.

“The self-employed workforce, contractors and freelancers, who have chosen to be their own bosses, do not want benefits and do not want rights. These are a group of professionals and entrepreneurs who should be supported and not punished by red tape and administrative burdens, such as the punitive IR35 legislation, so that they and the businesses who rely on them can thrive.”

Also commenting, Crawford Temple, CEO of Professional Passport, an independent assessor of payment intermediary compliance, said: “A broad-stroke approach to banning zero-hours workers needs a careful approach. While exploitation must never be condoned, many workers are happy with the flexibility that a zero-hours contract provides. Before they take any course of action, I would urge Labour to engage with the experts and stakeholders in the supply chain who understand today’s workplace.”

Temple said he was disappointed that no specific reference had been made in the King’s Speech to tackling tax avoidance. “I would like to remind Labour of their pledge on the campaign trail. The Tories had 14 years to address this issue, yet unscrupulous operators continue to exploit loopholes without punishment. Labour must ramp up its efforts to tackling tax avoidance to protect workers, particularly in the umbrella industry. 

“Many workers are being duped into signing up for tax avoidance schemes purporting to be umbrella firms. Visible and active enforcement is key to identifying non-compliance in all its forms.

“Labour must ensure that HMRC collaborates more closely with recognised compliance bodies to identify scheme architects and limit their market access. We need a multi-faceted approach that: equips HMRC with more resources; enhances enforcement; and implements stringent penalties for offenders.

“Such a collaborative approach can address root causes of non-compliance, promote best practices, and raise industry standards, creating a fairer economic landscape. All combined will help Labour to grow the economy which it has set out as its key mission.”

• Comment below on this story. Or let us know what you think by emailing us at [email protected] or tweet us to tell us your thoughts or share this story with a friend.

APPOINTMENTS: 11-15 NOVEMBER 2024

This week’s appointments include: Codatech, HR Star, Morgan McKinley, Org Group

People 12 November 2024

Haatch invests in recruitment streamlining platform TalentLynk

TalentLynk, a cloud calling and AI-powered communication platform, has secured £335k in pre-seed funding from established UK investor Haatch.

Contracts 12 November 2024

NEW TO THE MARKET: 4-8 NOVEMBER 2024

This week’s new launches include: Archer Search Partners, Bakkavor, Get the Job, Investigo, Jobmatch Sweden

New to Market 5 November 2024

Director of tax avoidance scheme firm Peak PAYE disqualified until 2034

A director who promoted a tax avoidance scheme that deprived HM Revenue & Customs (HMRC) of more than £2.5m in unpaid tax has been disqualified, the Insolvency Service has revealed.

Legislation 4 November 2024
Top