Although Hermes and the GMB Union have struck an agreement, which is likely to be favoured among gig workers because it guarantees minimum wages and holiday pay, businesses should think twice before blindly adopting a similar agreement as HMRC may yet seek to treat these agreements as employment for tax purposes.
What does the agreement really mean?
At the moment, the agreement gives roughly 15,000 UK Hermes couriers the option to choose contracts which provide some employment rights, such as guaranteed minimum wages and holiday pay, supposedly without losing their ‘self-employed’ status. This choice gives them essentially the opportunity to continue as ‘self-employed’ workers or change their status to ‘self-employed plus’, inclusive of some employment rights. However, when opting in, couriers give Hermes a degree of control, such as determining the order and route of deliveries.
How could it impact the tax position of workers?
In order to determine employment status for tax purposes, HMRC offers a test known as CEST (Check Employment Status for Tax), of which one of the main elements is “control”. The additional control required by Hermes could endanger the couriers’ self-employed status and considerably increase National Insurance for both the worker and the company.
While there is little doubt that workers accepting the “self-employed plus” contract are more likely to be regarded as liable to PAYE, the implications of this agreement could be more significant than many might think. For example, the couriers who decline the offer of increased rights could still be negatively affected if the working practices between ‘self-employed’ and ‘self-employed plus’ workers are similar and HMRC determines that PAYE applies to all couriers.
What should you be considering?
With so much recent change and uncertainty, seeking for professional advice before taking any actions regarding these agreements is advisable. Key points to consider are:
- Does the contract clearly demonstrate a self-employed business to business arrangement?
- Does the reality of the relationship mirror the contract and clearly display self-employment characteristics?
- If the contract is changed, will the status of employment or self-employment also change?
- Does the provision of some employment rights and increase in control actually create an entitlement to additional rights other than those offered?
For further information please contact Andrew Brookes, tax senior manager and employment specialist on +44 (0)1252 894928 or at firstname.lastname@example.org