- Project plans
- Project activities
- Legislation and standards
- Industry context
- Specialist wikis
Last edited 25 Nov 2020
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).
In 2018, An employment tribunal ruled that payroll company Hudson Contract Services was a effectively a contractor and so liable to pay the CITB levy. Hudson twice appealed the ruling but was refused on both occasions. On 10 March 2020, Appeal Court judge Lord Justice Underhill said; “Hudson is after all a sophisticated form of labour-only subcontractor, on terms that remove risk in relation to construction activity.”
 Related articles on Designing Buildings Wiki
- Construction industry scheme.
- Good Work Plan promises clearer contracts, fairer rules
- Hourly rate.
- IR35: essential steps for compliance.
- Mixed partnerships.
- Non-productive overtime.
- Personal service company.
- TUPE Regulations.
- Umbrella companies.
 External references
Featured articles and news
The last few days, but action needed over the next decade.
80 construction leaders and companies from across the UK.
Promoting the importance of building and fire safety.
A brief run through essential training tips from a user.
A comprehensive guide from a Cohesive BIM wiki user.
From the basics to the future from our Cohesive BIM wiki.
As electrical sector feels skills shortage bite.
CIOB Academy’s course take-up inked to external factors.
Q and A with self-representing artist, Hannah Shergold.
And publishes three-year strategic plan.
Introducing changes to make it more effective from 2024.
Shortlist announced for 2023 public choice award vote.
The last of the Victorians. Book review.
An exotic name that is shrouded in mystery.
From practice to research and the business of materials.