National Insurance Changes for Construction Industry Will Hit Workers Hard

Construction union UCATT have reacted angrily to a major tax change affecting for their industry, which was hidden, in the Government’s pre-budget report.

The Chancellor Alistair Darling has announced the ending of an exemption of national insurance contributions for holiday pay. The exemption was originally created for construction workers to help ensure that companies paid holiday pay

Over 225,000 construction workers are part of the construction holiday scheme which is operated by the not for profit organisation the B&CE. Companies whose members are in the scheme receive a 12.5 % national insurance exemption on all holiday pay.

The Government is ending the exemption as many non-construction companies have begun to abuse the system. While the exemption will close for non-construction companies at the end of this month, the construction industry has been granted a five-year transitional period. It is estimated that ending the concessions will save the Government just £50 million per annum

The Government have argued that the scheme is now superfluous as companies are obliged to pay workers holidays under the Working Time Regulations.

UCATT believe that the closing of the scheme is potentially disastrous, as many companies will use the changes to end direct employment of workers and instead opt for bogus self-employment.

Bogus self-employment allows companies to avoid employer national insurance payments. While, workers are stripped of employment rights, denied benefits such as sick pay, do not have pension arrangements and work on sites, which have lower levels of health and safety.

Bogus self-employment also costs the Exchequer at least £2.5 billion a year, as employers escape NI contributions and workers pay a lower level of tax and can set “expenses” against tax.

Alan Ritchie, general secretary of UCATT, said: “This is a short sighted move by the government and is indeed an own goal. Once again the Government have missed a golden opportunity to crackdown on bogus self-employment which costs them billions in lost revenue and corrupts the construction industry.”

“Instead they want to end a key concession which encourages companies to directly employ their workforce. It gives employers another excuse not to have a properly paid, secure and safe workforce. This will harm safety and increase exploitation on construction sites.”