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A plumber has won a landmark legal case that is likely to have widespread implications for workers on self-employment contracts. Gary Smith, who worked for London-based Pimlico Plumbers full-time for six years, took his case to the Supreme Court, over his entitlement to rights such as sick pay. The five Supreme Court justices rejected an appeal by Pimlico Plumbers against a number of court rulings that determined he could claim “worker” status, even though he was described in his contract as a “self-employed operative”. Announcing the decision in London, Lord Wilson said an employment tribunal was “entitled to conclude” the firm could not be viewed as Mr. Smith’s “client or customer”. The judge said: “Although the contract did provide him with elements of operational and financial independence, Mr. Smith’s services to the company’s customers were marketed through the company. “More importantly, its terms enabled the company to exercise tight administrative control over him during his periods of work; to impose fierce conditions on when and how much it paid to him, which were described at one point as his wages; and to restrict his ability to compete with it for plumbing work following any termination of their relationship.” Some commentators have said the ruling is expected to have a major impact on what is often called the gig economy. Flexible working arrangements, many of which involve firms recruiting people on a self-employed basis, have been on the rise in recent years. It is thought the ruling could affect a number of other cases currently progressing through the courts but Pimlico Plumbers’ lawyer claimed its impact would be limited. Susannah Kintish, of Mishcon de Reya, said: “This judgment does not lay down any new principles of law around worker status. “Instead, all eyes will be on the government as businesses await legislation on how to categorise their workforce – something which could still be a matter of years away. “In the meantime, the gig economy continues to evolve and existing employment law is rendered increasingly unfit for purpose. “The Supreme Court Justices have made it clear that this judgment is very specific to the unique facts of the case. “It will, therefore, do little to stem the flow of litigation around worker status which, in the absence of any overarching principles, will need to be determined on the specific circumstances of each case.” Mr. Smith was on call by Pimlico Plumbers to carry out jobs for its customers and had a company uniform and van which he rented. He claimed that, after suffering a heart attack in 2011, he was unfairly dismissed when he tried to reduce his hours. A tribunal made a preliminary finding that he was a “worker” within the meaning of the 1996 Employment Rights Act – a decision that was upheld by the Employment Appeal Tribunal and again by the Court of Appeal in January last year. The Court of Appeal found Mr. Smith was a worker because he was required to use the firm’s van for jobs and was contractually obligated to work a minimum number of hours a week. As a “worker”, he was entitled to employment rights including holiday and sick pay, the court said. HMRC lost IR35 cases against a Jensal Software Ltd and Armitage Technical Design Services Ltd (ATDSL) recently.

An independent research carried out by the Independent Health Professionals Association (IHPA) has revealed that the upper management of NHS trusts across the country has been involved in a multi-million-pound tax dodge. After an in-depth analysis by legal experts at the IHPA, it was found that hundreds of NHS Trusts and accountants have been exploiting a loophole in the tax system that has resulted in umbrella companies pocketing up to 50 percent of the VAT. This has resulted in the financial ruin of a number of zero-hours NHS employees due to huge tax bills, and has led to significant losses to taxpayers. The tax avoidance scheme involves accountants claiming to be offering healthcare services to Trusts in order to exploit a legal loophole. It resulted in tax avoidance of millions of pounds that should have gone to the Exchequer and then to the NHS that at present is facing financial difficulties. In addition, the affected workers will likely leave their roles at the agency due to facing financial breakdown, bankruptcy, and hardship. According to the report from the IHPA, senior level employees at the NHS Trusts favoured blanket assessment of all independent contractors working at the public-sector company. The contractors were deemed to be self-employed regardless of the nature of their services, which unfairly stripped them of the benefits offered to regular workers. The scheme was considered illegal after the introduction of the IR35 tax reform in April 2017. Still, the practice has continued throughout the public-sector organizations including the NHS. The scheme to avoid taxes was previously described by ex-chair of the Public Accounts Committee Dame Margaret Hodge as “Aggressive Tax Avoidance” and “Outrageous”. While the private companies cash in from the scheme, workers face exploitation due to lack of benefits including sick pay, holiday pay, and pensions. The unfair tax treatment has actually resulted in these employees being taxed higher as compared to regular workers. Final Remarks NHS Trusts are not only dodging tax bills, they are also flaunting the law by exploiting independent workers most of whom belong to minority population segment. This scandal could result in a court case against the NHS chiefs, accountants, agency staff, and emergency care providers according to the Criminal Finance Act 2017. The scandal has emerged at a time when there is a growing criticism over the unfair prosecution of public and private sector workers by the HMRC. The poorly drafted resolutions regarding agency workers and contractors including the 2019 Loan Charge and IR35 (Off-payroll) legislation are expected to create a catastrophic effect in the UK economy. Industry experts including head of legal department and Secretary General of the IHPA have fustigated the tax avoidance scheme by the NHS Trusts bosses and accountants and called for a stop to the current illegal practices.

Uber is to introduce numerous protections for its drivers through a new insurance scheme, including sick pay and maternity and paternity payments The ride-hailing up, which has been involved in court cases over its use of gig-economy drivers, said it will provide insurance cover at no extra cost to its for 150,000 drivers across Europe. Provided in partnership with AXA, Uber’s Partner Protection scheme will cover drivers against major cost or reductions in income resulting from accidents or injuries that occur when they have passengers in their vehicle. The scheme, which begins on 1 June, will also provide income protection for events that happen when they are not working for Uber, such as sickness, having a baby, or jury duty. However, drivers have to meet strict criteria to be eligible for the “off trip” insurance. Passenger drivers have completed 150 trips in the previous eight weeks before they can claim sickness, maternity, paternity or jury duty pay, while a delivery driver on its food delivery service Uber Eats must have completed at least 30 deliveries in the previous eight weeks to qualify. For sickness or injury leading to more than seven consecutive days of inability to work, Uber’s passenger service drivers would receive £75 per day for up to 15 days. Uber Eats drivers would receive £30 per day. All drivers would be paid a £1,000 lump sum while on maternity or paternity leave, and a £500 lump sum for jury service. If they are injured while on a job for Uber, they would receive medical cover paying out up to £7,500. Fellow gig-economy delivery firm Deliveroo has also announced that it will begin offering it’s 35,000 cycle couriers free insurance to protect them and their earnings if they are involved in an accident. It includes cover for up to £7,500 of medical expenses and up to 75% of average gross income. In October 2016, the Central London Employment Tribunal ruled that Uber drivers could not be classified as self-employed and were entitled to rights including holiday pay, the national minimum wage, and breaks. The decision was upheld by the Employment Appeal Tribunal in December last year. Uber admitted that in the past it had “focused too much on growth and not enough on the people who made that growth possible” and wanted to give its drivers more security. Pierre-Dimitri Gore-Coty, vice-president and head of operations EMEA at Uber, said: “Partner Protection is an important step in addressing some of the biggest concerns raised by our independent partners who rely on Uber. But the listening doesn’t stop here. We’ll continue to ensure that the voices of the drivers and couriers are heard as we take Uber forward together.” Mick Rix, national officer at the GMB union, which represents Uber drivers, said the decision was “a major step in the right direction”. However, the scheme was likened to a publicity stunt by the Independent Workers Union of Great Britain. James Farrar, chair of the union’s United Private Hire Drivers branch, said: “Sadly, this is once again a case of tinkering around the edges for a quick PR win, rather than dealing with the issue at hand.”

The GMB union announced on Monday that it is taking legal action on behalf of members working for three delivery firms used by Amazon, arguing that the companies wrongly classed them as self-employed. The GMB union wants its drivers to be given guaranteed hours and the minimum wage as well as sick and holiday pay. The union said drivers should be classed as full-time employees rather than self-employed workers. Amazon said its delivery providers were “contractually obligated” to pay drivers minimum wage. The union said that drivers for the three firms were paid per parcel delivered and faced issues that fully employed workers did not, despite performing very similar duties. Those issues include lack of job security, responsibility for insurance and maintenance of their vehicles and no right to sick pay, holiday pay or overtime. Steve Garelick, a regional organiser for the GMB, said: “They are expected to deliver regardless of what their run is. They’re not paid any more for going over what anyone would consider reasonable hours to deliver – and they get penalised if they don’t deliver.” The union said it was only bringing cases against delivery firms where GMB members had asked it to do so. GMB general secretary Tim Roache said many of the union’s members who deliver packages for Amazon faced unrealistic targets, pay deductions if those targets were not met and “being told they’re self-employed without the freedom that affords”. “Companies like Amazon and their delivery companies can’t have it both ways – they can’t decide they want all of the benefits of having an employee, but refuse to give those employees the pay and rights they’re entitled to,” he said. Amazon said its delivery firms were expected to pay drivers a minimum of £12 an hour, “follow all applicable laws and driving regulations and drive safely”. “Allegations to the contrary do not represent the great work done by around 100 small businesses generating thousands of work opportunities for delivery drivers across the UK,” it added. Drivers told that they were not paid on time and required to break the speed limit in order to stay on schedule, and that they were not even allowed the time for toilet breaks. In April, the delivery company Hermes, which delivers packages for retailers such as Next, Asos, John Lewis, Topshop and River Island, began a legal battle with eight of its own drivers. It is under pressure to settle after rival delivery firm DPD offered all its drivers sick pay and holiday pay as part of wholesale reforms to its gig working model sparked by the death of a driver it charged for attending a medical appointment to treat his diabetes and who later collapsed and died. In 2016 the ride-hailing firm Uber was told its drivers should be classed as workers with minimum-wage rights. Uber, which says its drivers are self-employed, lost its appeal against the decision last year but said it would appeal again. The case could end up in the supreme court this year.

Yet another court victory of an independent contractor against HM Revenue & Customs (HMRC)’s IR35 has come to the limelight, although the case was heard about a year and a half ago at the First Tier Tribunal (FTT). The plaintiff in the case was Mr. Armitage’s personal service company — Armitage Technical Design Services Ltd (ATDSL). To avoid lengthening the case, Armitage had offered to settle the tax amount due on the condition that no penalty was imposed. However, HMRC had refused and insisted that the penalty should be paid due to negligent action of the taxpayer for not having discussed the IR35 with the accountant before submitting the P35. Background of the Case Armitage has worked in the nuclear industry in the capacity of an electrical control and instrumentation designer for decades. He offered his services to Diamond Light Source Ltd. through ATDSL and two other employment agencies. According to HMRC, the work performed by Armitage between the period 2009 and 2014 was taxable under IR35 (https://www.ssumbrella.co.uk/what-is-ir35/). Armitage worked on different projects for DLS and other customers. The case was evaluated by the presiding judge based on various points regarding employment and self-employment including the following. Control over Work Personal Responsibility Independent Work An Employee of the Organization Mutuality of Obligation (MOO) The judge noted that Armitage had worked from Warrington and came to the DLS headquarters located in Didcot once per project. He had control over deadlines and did not supervise the staff. Based on these facts, the judge had ruled that DLS did not exercise control over Armitage similar to other employees, which meant that he worked as a self-employed individual. In addition, the judge had found that DLS could easily have employed another qualified individual in place of Armitage, although it did not practice this right in reality. This meant that Armitage was not personally responsible for completing tasks. Another point in favour of Armitage was that he was not part of DLS’s employee time management system similar to regular employees. Armitage worked for multiple clients and used his own software for time and project management. Moreover, it was found that Armitage had not received benefits similar to DLS employees. He was not offered holiday or sick pay, or a personal locker as given other employees. This was because he was not considered employee of an organization. Lastly, the judge had stated that the just because Armitage had offered services to DLS does not mean that mutuality of obligation (MOO) was applicable. Based on the above findings, the judge had decided that Armitage’s work does not fall under IR35. He ordered that all tax and penalties should be cancelled. This shows the weak argument of HMRC in blindly extending IR35 reform to all independent contractors. HMRC already lost an IR35 case against a contractor (Jensal Software Ltd) recently.

The decisive court victory of Jensal Software Ltd. against HMRC shows that the CEST tool cannot be used as a litmus test for IR35 tax status determination. The main factor that contributed to the decision going against the tax agency was the test of Mutuality of Obligation (MOO). MOO is an important factor when deciding whether an independent contractor offers services similar to a regular employee. This is the main factor that determines off-payroll or IR35 status of a locum contractor. However, this same factor is omitted when determining tax status using the HMRC’s CEST tool. A surprising revelation from a webinar in which representatives of NHSI, NHS Trusts, and HMRC were present was that the MOO test was omitted from the CEST tool. This was due to the erroneous assumption that MOO is present in all agreements with contractors. The latest court case against HMRC highlights the faulty reasoning in using the CEST test. According to Jolyon Maugham, the Director of The Good Law Project, this will raise the question whether actions of the UK public companies such the NHS and BBC in categorizing independent contractors as regular employees were lawful. Impact of the Court Decision on Locum Contractors The recent court findings suggest that CEST tool is not suitable and cannot be used of determining IR35 tax status. Without taking consideration of MOO, a contractor cannot be classified as an employee. MOO must be considered by public companies such as NGS Trusts when making a decision regarding the tax status of a locum. The ruling of the recent court case signifies that the HMRC cannot encourage the use of CEST tool for tax determination. Whether an independent contractor offers services as an employee depends on the obligation of the worker to offer services to the company and the corresponding responsibility of the company to accept work. However, only a few locum contracts have a significant degree of MOO and the omission of this in the CEST tool to determine IR35 status is a clear mistake by the HMRC. Without this critical factor, an independent contractor cannot be said to be a permanent employee and therefore should not be taxed. The HMRC has deliberately omitted MOO in assessing IR35 tax status. And this fact has been highlighted in the recent court victory of the IT company. It has shown that HMRC’s CEST tool is not credible is assessing IR35 status. As a result, there is a high likelihood that it will change the tax status of many locum contractors thereby reducing the tax obligations.

HMRC has opened its long awaited private sector consultation to tackle non-compliance with the IR35 reform. Last year in the Autumn Budget 2017, the government had hinted that it would discuss the problem of non-compliance of the IR35 reform or off-payroll working rules in the private sector. According to estimates by the HMRC, only 10 percent of personal service companies comply with the legislations. The cost to the government due to non-compliance of tax legislation is reckoned to be about £700 million in 2017/18. This amount is estimated to increase to £1.2 billion in the next five years if no action is taken in this regard. The IR35 was introduced in the year 2000 to ensure that independent contractors who offer services through a third party or umbrella company but work like an employee pay taxes like regular employees. Previously independent contractors were required to report whether their work come under IR35. But after introduction of the IR35 reform in April last year, the responsibility of ensuring compliance with tax rules had shifted from contractors to recruitment agencies or public bodies that hire services of the contractor. This was intended to increase the revenue by £185 million. Due to financial difficulties faced by the introduction of IR35 reform, a lot of public sector independent contractors particularly those related to the IT sector had decided to move to the private sector. Some departments had to increase the day rates in order to retain skilled staff. The HMRC is now keen to extend the IR35 reform that has attracted a lot of criticism to the private sector. Having said that, the department has stressed that no final decision has been taken in this regard. According to a spokesperson of the HMRC, the government has not made any decision to extend tax reform. At the moment, the government is only considering how the IR35 reform has affected the public sector and how it will impact individuals and businesses in the UK. But the spokesperson also added that evidence show that the reform has been highly effective in addressing the issue of non-compliance with IR35 reform or off-payroll working rules. This means that it's highly likely that the reform will be extended to the private sector. If the IR35 rule is extended to the private sector, nearly two million or one-third of private sector employees could be affected.

More than six million British workers had lost around £470 on average in 2016. The total unpaid wages — or wage theft to be more appropriate — amounted to £3.1 billion. About half of this amount was unpaid holiday pay. The extra cash lined pockets of bad employers, which has caught the attention of the UK of Labour Market Enforcement, Mr. David Metcalf. Metcalf came to know about employee exploitation after visiting businesses and government agencies in Scotland. Discussions with stakeholders revealed shocking abuse of mostly low paid British workers by scrupulous employers. Citing official statistics, Metcalf said that nearly 360,000 workers in the US were paid less than the minimum wage. According to Metcalf, failure to pay out holiday pay is a serious issue and that there is no agency that governed enforcement of pay regulations. He said that major companies are responsible if other companies in the supply chain are found guilty of 'wage theft'. The LME Director recommended establishing a government regulatory body for holiday pay to tackle this issue. He recommended three agencies for enforcement of labour market regulations: the Gangmasters and Labour Abuse Authority (GLAA), HM Revenues and Customs, and the Employment Agency Standards Inspectorate (EAS). He stated that if his suggestions were accepted it will ensure that honest British workers are not undercut by scrupulous employers. Metcalf also called for a clear complaint channel, a written statement of worker rights, and a payslip stating income and deductions. To punish the guilty parties, the LME Director proposed an increase in fine for non-conformance to minimum wage regulations. At the moment the average fine is only £156 per worker, which is too low to deter employers from violating minimum wage rules. He also called for shaming companies that break the law by underpaying employees. Non-compliance Common Across Multiple Sectors in the UK Non-compliance with labour laws relating to minimum wage and employee exploitation was found across a number of sectors such as nail bars, hand car washes, shellfish gathering, construction, warehousing, hospitality, and personal care. Metcalf stated that the responsibility of noncompliance rests with both brand names and contracting agencies, and called for sanctioning of both parties in order to address the problem. According to Metcalf, the public sector needs to take a lead in ensuring that all parties within the supply chain comply with employment laws. This is important to ensure that employees are not mistreated and also that the business could prosper in the UK.

The HMRC IR35 tax reform, introduced last year, had attracted a lot of controversies. The tax reform has created financial difficulties for many independent contractors. In the latest case relating to the tax reform titled Jensal Software Ltd v Revenue & Customs, the judge had ruled in the favour of an IT Contractor named Ian Wells who had appealed against a tax bill that exceeded £26,000. Mr. Wells provided IT services to the Department for Work and Pensions (DWP) between May 2012 and April 2013 through his limited company, Jensal Software Ltd. HMRC had argued that since then there was a direct contract between DWP and Wells, it constituted a contract of service under IR35. But the presiding Judge Jennifer Dean had ruled that the mutuality of obligation (MOO) does not demonstrate a contract of interest. The level of control does not extend beyond the irreducible minimum. So, there is no contractual relationship between the two parties. The elements of contract demonstrated that Mr. Wells had worked as an independent contractor. Main Points from the Jensal Software Ltd v Revenue & Customs Case A lot of interesting points emerge from the latest court cases involving IR35. The conclusive ruling in favour of the IT contractor shows that MOO is not enough to show a contract of service under IR35, which has weakened HMRC argument regarding MOO and the decision to omit it from the CEST tool. In this case, the HMRC had tried to use the strategy of promoting its narrow interpretation of the MOO, but it flopped. According to Judge Dean, no restrictions were imposed on Mr. Wells in the contract. The lack of control suggested that there was no employment contract between DWP and the HMRC. Judge Dean had concluded that the HMRC cannot use the argument of MOO in proving that there was a contract of employment. Although Wells had agreed to provide progress reports, the level of control was not sufficient to deem it as an employment contract. Mr. Wells had provided services to DWP as an independent contractor and therefore should have been charged a tax. The outcome of the court case shows that the HMRC can no longer continue to use MOO as an argument for a contract of service between a contractor and an institution. The court outcome will likely influence similar cases that are expected against the HMRC.

The latest report by Experis has revealed that Big Data skills are in high demand across the UK. According to the report titled, the Tech Cities Job Watch, the demand for Big Data skills in Q1 2018 has increased by 78 percent as compared to the same quarter last year. The report that is published every quarter by Experis, an international IT resourcing firm, sheds light on business and employment outlook in 10 cities in the UK. The quarterly job report monitors IT jobs and income advertised in Web Development, Mobile, IT Security, Cloud, and Big Data segment in the UK. According to the report, contractor demand of individuals with Big Data skills has increased by up to 128 percent as compared to last year. Also, the demand for permanent jobs has increased by up to 68 percent. The latest report has also found that the most in-demand programming certifications for Big Data positions include Java, Python, Spark, Hadoop, Cloudera, Hive, MongoDB, and Tableau. In addition, hybrid roles in which individuals have a broad knowledge of IT are also in demand at the moment. Reasons for Increase in Big Data Positions The rising demand for Big Data roles in the UK builds on a similar increase in demand last year. Experis UK and Ireland Director of Specialists Markets, Martin Ewings, states that the EU GDPR laws and Internet of Things (IoT) has put pressure on companies to focus on improved data management. As a result, corporations in the UK are eager to hire individuals with the right skills to manage data. But Ewings also thinks that most companies don’t fully comprehend the skills required for data management. He says that a data architect or engineer is more important to improve data infrastructure as compared to a data scientist, which not many companies are aware of. Individuals with Big Data skills earn the highest advertised salary on average of about £67,464. However, the salaries have remained somehow fixed with only 0.1 percent increase since the previous year. This represents the lowest increase in salaries as compared to the other five technologies. According to Ewing, various reasons can be cited for a stall in the salaries of Big Data positions. A rebalancing in the market is one of the reasons for a ceiling in the salaries. Increasing numbers of IT professionals have updated their skills to meet the market demand. The increase in the supply of IT specialists with Big Data skills has resulted in the stagnation in pay increases. But overall, the demand for the role remains strong.