Bogus self-employment in construction out of control

02 August 2017

Unite the union, is calling for root and branch reforms of employment rights after new figures demonstrated bogus self-employment in construction has risen sharply.

A freedom of information request by Unite has revealed that in 2016/17 at least 1.076 million construction workers were paid via the Construction Industry Scheme (CIS), an eight per cent increase on the figure of 12 months ago when 992,973 were paid via CIS. In total 47 per cent of the entire construction workforce is now paid via CIS.

According to Unite the sharp rise in workers operating via CIS demonstrates that the government’s hopes of reducing construction bogus self-employment, has failed. In 2014 the government introduced measures that barred construction workers operating via engagers (employment agencies and payroll companies) from being self-employed.

CIS is the stand alone tax system for construction workers. Workers paid via the scheme are normally officially classified as self-employed although the nature of their engagement means that the vast majority are bogusly self-employed.

The bogusly self-employed have all the employment characteristics of an employee but are denied even the most basic employment rights such as holiday and sick pay and can be instantly dismissed without warning.

The principal beneficiaries of bogus self-employment are employers who do not pay employers’ national insurance contributions of 13.8 per cent and don’t have to pay employee benefits such as holiday pay.

The government’s 2014 reforms led to a huge increase in workers being paid via umbrella companies, which results in the worker having to pay both employers’ and employees’ national insurance contributions as well as a plethora of other deductions from their wages. The government has previously conservatively estimated there are 430,000 workers being paid via umbrella companies, the majority of whom work in construction.

Unite states that the government’s much heralded Taylor Review, while calling for it to be clearer to “distinguish” between workers and self-employed workers fails to address how existing Treasury policies are creating bogus self-employment and causing worker exploitation.

Gail Cartmail, assistant general secretary, of Unite said

“We have huge numbers of construction workers being routinely exploited via the government’s own tax scheme and via umbrella companies and yet the Taylor Review has ducked these issues...

The only way that workers will be treated fairly and decently is by introducing clear rules which ensure that workers are either genuinely self-employed or paid by a standard PAYE method. Without such a reform, productivity in construction will remain low, accidents and ill health will be high and the industry will fail to train sufficient numbers of apprentices.”

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