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False self-employment rules hit construction industry

New ‘false self-employment rules’ are hitting construction firms, according to a report by law firm Irwin Mitchell.

The survey of over 600 UK construction firms found that one in 10 respondents said they had become less competitive when tendering for work as a result of the Onshore Employment Intermediaries legislation. The new rules, enforced in April, make recruitment firms liable for the tax and National Insurance Contributions for workers in the supply chain falsely operating on a sole trader or self-employed basis.

By April 2015 it will also become compulsory for employment agencies to report individuals that are not taxed as employees to HMRC. Failure to do so will result in financial penalties.

The findings of Irwin Mitchell’s survey also showed that only a quarter of construction businesses that use temporary agency workers are aware of the new rules. Out of those, only 13% said that employment agencies were passing on the cost associated with the new rules to the end user.

Significantly, almost one fifth of construction firms say that the new rules are affecting how they price jobs, with 10% claiming that they are now less competitive when tendering for work. In addition, 60% of construction firms expect labour costs to rise during the next 12 months.

In a press statement, Christopher Tutton, employment partner at national law firm Irwin Mitchell, said: “I think it likely that recruitment firms will increasingly try to pass costs back once the reporting requirements kick in next year, with employment agencies having to report non-taxed workers to HMRC from that date, or face penalties.”

Mitchell also said he believed that tight margins, increasing costs and reporting obligations will see more recruitment agencies report changes in the ways they price work.  He added: “This in turn will have a knock-on impact on the competitiveness of UK construction firms.”

Recruiter contacted several recruitment firms about this issue but none of them commented in time for the deadline. Watch out for coverage on a panel debate addressing the onshore employment intermediaries legislation in the next issue.

Look out for coverage on a panel debate addressing the onshore employment intermediaries legislation in Recruiter’s October issue, out next week. - See more at:
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