The Government recently published its interim Labour Market Enforcement Strategy 2022/2023 in which it outlined four key themes: Improving the radar picture; Improving focus and effectiveness; Better joined-up thinking; and Engagement and support.
The author of the report, Margaret Beels, was charged with devising a strategy to help shape a modern, working landscape for the better. Her predecessor, Matthew Taylor, helped to develop the 2018 ‘Good Work Plan’ which was intended to shape the UK’s working practices for a twenty-first century Britain. In the report, Ms Beels apologises for its late publication (which she puts down to the COVID-19 pandemic, and the delay in her appointment) and outlines areas where the current labour market needs action. However, given that Mr Taylor once pointed out the ‘deafening silence’ by the Government on the intentions and proposals of previous reports, we remain hopeful but not overly-optimistic that Ms Beel’s report will be heard and acted upon by policymakers.
Four Themes
Digging deeper into the four themes in the report, the ideas they contain are certainly to be commended. The underlying factor in all of them is how the Government, stakeholders, and the whole supply chain can work together better in order to eliminate non-compliance and raise standards within the umbrella industry.
The key is open communication, transparency and enforcement.
When we consider the changing landscape of work over the last 40 years, it’s obvious that the 9-5 has vanished for many people, with working-from-home, the flexible workforce, and the gig economy allowing self-employed freelancers and contractors the freedom to choose how and when they work.
With this change has come a raft of regulation and legislation as policymakers play catch-up and try to navigate this fast-moving working landscape. However, they have been too slow. And the result is a steep rise in criminal activity, tax avoidance, disguised renumeration schemes, labour exploitation … the list goes on.
Almost as a kneejerk response the Government has commissioned consultations and reports, and has introduced various pieces of legislation. But it has consistently failed to listen to advice and recommendations from stakeholders and industry experts, and the result is that any legislation that has been passed continues to fail to address the underlying challenges and issues that we face.
Visible Enforcement is Vital
It’s clear that the current enforcement strategies are not working. At the moment, they simply incentivise non-compliant offerings and fail to support the compliant parts of the sector. Moreover, the lack of visible enforcement, the lengthy delays in taking any action, and the targeting of workers for the recovery of lost tax revenue merely serve the interests of those who seek to break the rules.
We understand that enforcement is expensive but without it there is little incentive to abide by the rules. In fact, it can be argued that the lack of enforcement has fuelled the incentives that allow non-compliant providers to flourish. Issues such as changes to the Off-Payroll legislation that now applies to the private sector have contributed towards incentivising abuse, and the issues that we now see – holiday pay, skimming, mini umbrellas, and disguised renumeration – are the result.
Ms Beels needs to ensure that enforcement remains high on the agenda and is not allowed to be diluted as various Government departments collectively try to work out how to deal with the issues.
Acting on the data
HMRC already holds the appropriate information that would make it easy to identify and act on non-compliant schemes, allowing them to be closed down sooner. Real-Time Information (RTI) reporting, introduced in 2013, and Intermediary Reporting, from 2014, provide HMRC with two sets of data that offer a clear and unique insight into the market and further supply chain. Integrating that data would allow red flags to be apparent and assist HMRC in not only identifying dubious providers but taking action against them.
HMRC has also introduced a ‘name and shame’ list of tax avoiders. However, the list suggests that some schemes listed are still operating – and continuing to defraud contractors into signing up with them. In his recent budget the current Chancellor of the Exchequer, Jeremy Hunt, outlined his intention to tackle the promoters of tax avoidance and potentially introduce and increase prison sentences for such activity. Will simply reacting to the crime be enough? When HMRC already holds the data it needs to address and punish the perpetrators of tax avoidance the Government’s inactivity on this issue seems baffling.
Cooperation
What is needed is joined-up thinking. All the appropriate Government departments should seek to develop closer cooperative relationships with both industry compliance bodies as well as with wider sector bodies.
Compliance bodies already set their own high standards, and developing a more structured and cooperative approach would allow Government departments to inform and, most importantly, be informed of pressure points in the market. In particular, because the nature of compliance accreditation allows a rapid reaction to market distortions, limits and restrictions to market access for dodgy schemes could be implemented without delay. And including the wider sector bodies would provide the broadest and most effective reach for messaging across the sector. This would also benefit policymakers who could then design and implement an agreed compliance standard that works for everyone.
The strongest weapon against non-compliance is transparency and the best course of action is a collegiate one.
We hope that Ms Beels will take steps to implement her 22/23 findings, and then devise a 23/24 strategy that will underpin all the hard work of those who seek to raise standards, and rid ourselves of those who break the rules, behave unethically, and cause untold damage.
Action, not platitudes, is needed.
If you’re concerned that an umbrella company is violating any of the ethical or legal standards that we require from our Approved Providers, you can raise the issue here. We treat all concerns confidentially and seriously.
Comments