Payroll companies
The government believes that ‘employment intermediaries’, or ‘payroll companies’ have been used to enable workers to falsely claim that they are self-employed sub-contractors when in fact they are permanent, full-time employees. This allows them to reduce their employment taxes and obligations.
Payroll companies charge for this service, typically up to £25 a week, but payments can be as much as £1,250 per year (ref. HM Treasury Overview of Legislation in Draft 10 December 2013). It has also been reported that ‘rebates’ are sometimes offered by payroll companies to contractors and agencies that use them (ref. Construction Enquirer 19 February 2014).
Legislation was introduced in the Finance Bill 2014 to prevent this by treating payroll companies as employers and so requiring that they subject workers to tax and employee National Insurance Contributions (NICs) deductions at source and introducing a new liability to pay employer NICs.
These new measures came into effect on 6 April 2014.
It is considered that this will have the greatest impact on the construction sector, where around 200,000 workers are thought to be employed through onshore employment intermediaries. These workers will face higher tax and NICs liabilities, but will no longer be paying service charges, will gain statutory payments such as statutory sick pay and maternity pay, some will be eligible for the national minimum wage and they may become eligible for other employment rights.
There is criticism in the industry that this measure will burden contractors with extra costs at a time when the economic recovery is still very fragile. It has also been claimed that labour costs could rise by 25% and that this will hit sub-contractors on fixed-price contracts very hard (ref. Construction Enquirer 20 February 2014).
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
- Construction industry scheme.
- Gangmaster.
- Hourly rate.
- IR35.
- Mixed partnerships.
- PAYE.
- Personal service company.
- TUPE Regulations.
- Umbrella companies.
[edit] External references.
- HM Treasury Overview of Legislation in Draft 10 December 2013.
- Construction Enquirer 19 February 2014.
- Construction Enquirer 20 February 2014.
Featured articles and news
A survey of Leicester’s historic buildings resulted in local listing being taken more seriously.
Demolition is the most high risk activity in the construction sector. Read our introductory article here.
BSRIA report on the domestic boiler market, with China recording the most 'dynamic market uptake'.
Social value of infrastructure
Do we really know everything important about the impacts of our infrastructure projects? And if we don’t, does it matter?
Former Chief executive Richard Howson blames government for being 'poor payers'.
An environmental plan is an essential tool for setting and managing environmental objectives for a project.
CLC call for an 'outcome-based, transparent and efficient' industry with new report.
National Infrastructure Assessment
The first NIC assessment suggests there is a golden opportunity to provide low-carbon energy.
It's featured prominently as the backdrop to the World Cup coverage - read about the most iconic building in Russia.
Report highlights growing need for soft skills and digital skills among civil engineers.