The November 2016 Uber tribunal ruling, resulting in Uber drivers being successful in their bid to be awarded employee rights, means it is more important than ever to ensure that employers have considered the employment status of their workers.
The ‘Uber case’ - HM Revenue & Customs (“HMRC”) renewed attack on self-employed workers
The ruling comes as HMRC announces the launch of a specialist unit to investigate companies who opt out of giving workers employment protection, by using agency workers or calling them self-employed. The same team will also police the recent change in the rules (IR35) on personal service companies used in the public sector.
Incorrect classification can result in the employer or contractor being held accountable for any tax and/or National Insurance contributions (“NICs”) not deducted and paid (plus interest and penalties of up to 100% of the outstanding liabilities). Our experience suggests that many businesses believe that having a written contract in place is sufficient. However, it is important to note that employment status for tax purposes is not determined on the basis of any written contract alone. Both HMRC and the courts have been increasingly inclined to look beyond the contract to establish the reality of arrangements in place.
Businesses that depend on a self-employed workforce (e.g. with the use of self-employed workers, consultants and personal service companies) should review their arrangements immediately, to ensure they are robust and can withstand scrutiny. This type of ‘health check’ on worker arrangements should help identify areas of risk based on current
There are many factors involved in deciding whether a worker is employed or self-employed. No precise definition exists and in some cases it can be a complex and difficult decision.
The following changes relating to termination payments will be applicable from April 2018:
- All payments relating to payments in lieu of notice (“PILON”) will be subject to tax and NIC deductions irrespective of whether or not the PILON is contractual
- Align the rules for tax and NICs so that employer NICs will be payable on payments above £30,000 (which are currently only subject to income tax)
- Make the following changes to the exemptions for termination payments:
- Remove foreign service relief
- Clarify that the exemption for injury does not apply in cases of injured feelings. This is because of divergent judicial decisions about this issue
Non-contractual payments relating directly to the termination of the employment will continue to have the £30,000 income tax and employer’s NICs exemption. There will continue to be an unlimited employee NICs exemption on termination payments.
As an employer you should review your current policies and procedures in relation to termination payments.
Gender paygap reporting
Regulations are now in place meaning that by April 2018 employers will be compelled to publish data highlighting the gender pay gap within their organisation. This first report will cover the period to April 2017, and so data collection processes should be put in place now if they don’t already exist.
The gender pay gap is the difference between men and women’s aggregate hourly pay and makes no allowance for the nature of the roles undertaken. Therefore, it is likely that an organisation with junior roles predominantly staffed by one gender and/or senior roles by the other gender will show a significant gender pay gap.
The following changes will be introduced:
- The regulations will apply to employers who employ 250 or more employees
- Employers are required to publish the figures on the organisation’s website and submit evidence of compliance annually to the government. The published figures must show both the mean and median gender pay gap.
- Employers will also need to calculate and publish three other figures alongside the gender pay gap. These are:
- Gender bonus gap
- Proportion of men and women receiving a bonus
- Proportion of men and women working at each quartile of the organisation’s pay distribution.
Although there are not expected to be financial penalties for
non-conformance, the government has suggested that they will name and shame those who do not comply. Many employers are therefore considering now the explanatory text that they will publish alongside the statistical reporting.