Will the Government ever truly appreciate the UK flexible work force?

By Brookson

There are an estimated 2.5M workers within the UK flexible workforce. 1.7M of these are freelancers (IPSE data) and 1.2M work through recruitment businesses. These workers are providing their services to end client businesses but are not employed by those businesses – they are typically engaged directly by recruitment business, employed by an umbrella business or are self-employed, working through their own limited company or on an unincorporated basis. The flexible workforce has been growing steadily for many years, both prior to and through the recent recession. These workers are an important part of the growth story that we are now seeing in the UK economy, allowing businesses to commit resources to new projects or additional business activity that they would not be prepared to do if they need to employ permanent staff to do so. The flexible work force is a vital element for the UK in order to gain a competitive advantage in its activity in global markets.

So, are these vital workers being properly valued by the UK Government?

My high level answer to this question would be that the flexible workforce is more valued by our Government than it has been at any time previously, but there is still some way to go before it is properly appreciated and supported.

There are three elements that I have considered to come to my high level view – the understanding of the flexible workforce by Government, the legislative decisions taken recently impacting the flexible workforce and political moves made.

The flexible workforce is undoubtedly more understood by more policy makers than it ever has been. This greater understanding can be seen in many government and government department comments and communications on self-employed and flexible workers. There is much more differentiation between the various populations of workers with their differing needs. The discussions that we have with politicians and policy makers, both at a Brookson business level and through our FCSA industry trade body, clearly show an improving understanding of and appreciation for flexible workers. There is further progress needed on this but progress in levels of understanding has been positive over recent years in my view.

Government and policy makers have also demonstrated this greater understanding in the decisions that have been taken in the legislative framework around the flexible workforce. Some action has been taken by HMRC around the low paid end schemes abusing national minimum wage, travel and subsistence expenses and salary sacrifice schemes. 

The offshore and onshoreintermediaries legislation was very precisely focussed on false self employment schemes in particular sectors and which were prevalent at the low paid end of the flexible workforce, even though the reporting requirements element to this legislation is not quite so well targeted. IR35 has been left alone despite a number of reviews by the Government through OTS and the House of Lords Select Committee – this was the right answer in my view. It lets the genuinely self employed workers at the high paid end of flexible workforce retain the stability they have had for many years. I recognise that IR35 is flawed in a number of ways but it is manageable and known and these are valuable things as the economy starts to pick up. The IR35 Forum continue to work at improving the administration of this area of enforcement and the recent decision to withdraw the Business Entity Test’s previously issued is, again in my view, another positive step. The use of limited companies by contractors has also been reviewed and validated – again, a good outcome helped by the improving understanding of the relevant policy makers. There are a number of examples of sensible decision making in the legislative environment over the last few years.

Additionally, we have seen some positive actions in political as well as legislative terms. The recent appointment of David Morris MP as the Government’s self-employed ambassador is a significant step forward. A large population of the flexible workforce are self-employed contractors and freelancers and having a Government post specifically focussed on understanding all elements of the UK’s 4.6M self-employed individuals, including the contractor and freelancer elements feels like a substantial commitment from this Government. Obviously, we will wait to see what agenda is then driven by Mr Morris and the Government under this new appointment but I would see the appointment at this stage as extremely encouraging.

If I step back and look across the various activities of the Government, Government departments and other related policy makers or regulators/enforcement organisations, I am encouraged by what I have seen over recent years. More of these individuals appear to be getting more of an understanding of the flexible workforce and, in doing so, are seemingly recognising more of the value that this section of the UK workforce brings for the UK economy.

That said, there is still a long way to go. There is still undoubtedly a lot of abuse and exploitation at the low paid end of the flexible workforce that hasn’t yet been tackled by the Government. Low paid, low skilled often vulnerable workers are still being forced unknowingly into ‘industrial’ tax avoidance schemes for the benefit of end clients, recruitment businesses and umbrella business providers. These large scale abuses need to be tackled more rigorously. In doing this, there is a real and urgent need for the Government to properly understand the umbrella market. Compliant employment businesses are a vital part of the flexible workforce supply chain, providing significant benefits and protections to flexible workers who chose to work this way. Equally, there are instances where workers are being exploited. The key here is for politicians and policy makers to spend enough time understanding the abuses and stop these from happening rather than seeing all umbrella businesses as rogues. We see an example of this in the latest union campaign around umbrella working in the construction sector. This generated a day of action around the UK. Undoubtedly, the abuse of national minimum wage in all of its forms must be stopped – HMRC have the enforcement powers necessary to do this and I would hope that they would get on and sort these abuses out. The key point here is that the umbrella way of working is not the problem here – it is abuse of the existing legislation. This needs enforcement of current laws not a stopping of umbrella working completely.

In summary, I think this Government is increasingly recognising the contribution of the flexible work force and the environment we currently have is as good as it has been for many years. There is still further progress to be made and this should be concentrated on further education of politicians and policy makers on flexible workforce to ensure they continue to make sensible policy decisions and enforcement of existing legislation to ensure the known non-compliance problems in the flexible workforce are actioned, particularly at the low paid, potentially vulnerable worker end of the workforce.

Let’s see what 2015 brings!