Payroll companies are costing the Revenue millions in lost National Insurance contributions, UCATT says, and denying workers their basic employment rights.
The Mirror reported how payroll companies enable companies and employment agencies to register workers as self-employed, when they are really employees.
By using a payroll company to register workers as self-employed, the companies concerned can avoid paying employers national insurance contributions of 12.8%, it is claimed. As the workers are officially self-employed they are denied their employment rights, meaning that they can be sacked without notice or reason, do not receive holiday pay and are not paid sick pay.
In a perverse twist, the workers themselves rather than the contractor they work for, has to pay the payroll company for its services. Payroll companies either deduct a flat fee or a percentage of earnings directly from the workers pay.
UCATT has written to both the Inland Revenue and David Gauke MP, the Exchequer Secretary with responsibility for tax avoidance, demanding an investigation into the practices of payroll companies. UCATT claims that this is further evidence of the high levels of false self-employment in the construction industry.
UCATT general secretary Alan Ritchie said: “There has been a huge growth in payroll companies. These companies do not perform construction work, nor do they hire labour to companies. Their sole reason for existence is to enable companies to deny workers basic employment rights whilst avoiding paying national insurance contributions. The government and the Revenue need to intervene to end these practices once and for all.”
In 2009 the government launched a consultation into false self-employment in the construction industry. Under the consultation’s proposals, workers would be “deemed” to be employees for taxation purposes unless they met three distinct criteria. Since the change in government last May, no further action has been taken on the deeming proposals.
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