HomeInsightsBlogDon’t change your gig workers’ agreements yet…

Insights

Blog // 06/03/2019

Don’t change your gig workers’ agreements yet…

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?

Calculator and reciepts

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:

  1. Does the contract clearly demonstrate a self-employed business to business arrangement?
  2. Does the reality of the relationship mirror the contract and clearly display self-employment characteristics?
  3. If the contract is changed, will the status of employment or self-employment also change?
  4. 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 abrookes@menzies.co.uk

Print Friendly, PDF & Email


RELATED CONTENT
  • 2018 EU reclaims: Change of filing deadline in the event of a no deal Brexit

    Carol Hallam – VAT Manager Urgent action is required if you incur EU VAT in the member states and recover the VAT through the online EU reclaim portal. HMRC have advised that in the event of a no deal Brexit, the 2018 EU VAT claim will need to be submitted by 29 March 2019 when […]

    Print Friendly, PDF & Email
    READ MORE >
  • How competitive is the UK’s tax system in relation to others?

    Although the government is proud of the UK’s position with its most competitive tax system in the G20, initiatives such as the BEPS (Base Erosion and Profit Shifting) project, which has already been adopted by 124 countries, making it harder to stand out from the crowd. With tax becoming an increasingly important global topic, the […]

    Print Friendly, PDF & Email
    READ MORE >
  • Is your profit data misleading you? Part 1 – valuable insight

    Tim Dunn – Strategic Advisory Partner Developing good products and services is important, but it is not everything – commercially there are a number of pieces of the jigsaw that need to come together if a business is to achieve its potential and fulfil the owner’s dreams. Ultimately, profitability must be a key consideration – […]

    Print Friendly, PDF & Email
    READ MORE >