Rebecca Seeley Harris examines the implications of the new ‘self-employed plus’ contract agreed by courier company Hermes and asks how such a deal might interact with the UK tax system.
The GMB union and courier firm Hermes have negotiated a deal that will give couriers the right to opt into a “self-employed plus” contract. This will give them 28 days’ paid holiday annually, or the equivalent if they work part-time, and guaranteed pay equal to £8.55 per hour. If the courier opts in and joins the GMB they will also get union representation.
The negotiations were entered into as a result of 194 Hermes couriers being granted status as a so-called limb ‘b’ worker at the employment tribunal in June 2018. As a result, these couriers were given basic employment rights such as entitlement to paid holiday and national minimum wage but, these rights do not extend automatically to the entire workforce. So, the remainder of the 15,000 Hermes couriers did not benefit from the tribunal ruling until now.
The guaranteed wage of £8.55 per hour is above the current National Living Wage (NLW) minimum of £7.83 per hour, which rises to £8.21 per hour from April 2019. For those couriers who do not opt-in, there is no change, but Hermes report that these couriers will earn premium rates as they have done for the past 20 years.
What remains unclear is that although these individuals or ‘workers’ now get basic employment rights, they still pay tax as if they are self-employed. This is because in the tax system there are only two categories: employed or self-employed. However, for employment rights, there are three categories: employed, self-employed and worker.
Whether the courier is employed or self-employed for tax purposes is decided by employment status case law and neither the employment tribunal ruling nor the GMB collective agreement have any bearing on the status for tax purposes, as the two are not connected. However, in employment rights cases such as the recent Pimlico Plumbers case in the Supreme court, it is a lower threshold to prove worker status than employee status for tax purposes.
This now creates a workforce where apparently there are some genuinely self-employed couriers doing the same job as these new ‘self-employed plus’ workers with basic employment rights and union representation but no real difference in the way that they work.
It has been reported that the self-employed plus couriers will come under more control from Hermes, for example having to follow specified routes, but this has been denied by Hermes. As the workers themselves are all still paying tax as self-employed, this also means that Hermes is not making national insurance contributions on their behalf.
This issue was looked at by the Office of Tax Simplification (OTS) in the Employment Status Report . The OTS also made a recommendation that a cross-government working group be set up on employment status for the different departments to consider their relative positions, especially the mismatch in the system between employment status for employment rights and tax purposes. The group was formed in 2016, but put on hold pending the conclusions of the Taylor Review and does not appear to have been reformed subsequently.
Despite this, there is as yet no resolution to this conundrum. Until the system changes, those individuals who are granted status as a limb ‘b’ worker through the tribunals or by negotiation are still likely to pay tax as self-employed and gig economy firms will not be paying national insurance contributions. If I was HMRC, I would be taking a closer look at this situation.
About Rebecca Seeley Harris
Rebecca is a specialist in ‘employment status’ and the law involving independent contractors and the self-employed for the purposes of tax and employment law. Rebecca has run her own consultancy for the past 20 years but, has recently joined PKF Francis Clark as Director of Employment Status. She will be heading up a team covering all employment status issues such as off-payroll in the private and public sector, otherwise known as IR35, s.44, CIS and any issues affecting the self-employed and personal service companies.
Rebecca was also seconded to the Office of Tax Simplification (an independent body of HM Treasury) as a Senior Policy Adviser to advise the government on employment and tax status. She was part of a small team of experts who drafted the Employment Status Review 2015, she then continued to advise on the review of Small Company Taxation leading on the taxation of nano companies and the self-employed. As a result of that review, Rebecca developed the concept of SEPA, providing a vehicle to the self-employed to be able to protect the family home. Rebecca was also a representative on the Cross Government Working Group on Employment Status and has most recently published the review into the taxation of the Gig Economy.
To call Rebecca: 01392 407936 or email [email protected]