Government Consultation First Step In Reducing Construction Exploitation

Construction union UCATT have given a cautious welcome to the announcement today (July 20) that the Treasury have launched a consultation aimed at reducing bogus self-employment in the construction industry.

Bogus self-employment occurs when workers are officially classified as self-employed but have all the normal working relationships of an employee. Due to their self-employed status the bogus self-employed are denied basic employment rights, can be sacked at a moments notice, are denied holiday and sick pay, are not entitled to many benefits when they are out of work and are unlikely to have a pension.

Most cases of bogus self-employment occur through the Construction Industry Scheme (CIS) the stand-alone tax scheme for the industry. Unlike all other forms of self-employment workers are taxed at source.

The Government are proposing that all construction workers will be deemed to be employees unless they supply their own materials, provide a substantial amount of plant, or are providing other people’s labour as well as their own.

Due to lower safety levels on sites which use the bogus self-employed, workers are at far greater risk of being injured or killed. In recent weeks the Donaghy Report into construction safety and the DWP select committee, have both been sharply critical of high levels of bogus self-employment in the industry and have cited it as a key factor in the high numbers of construction deaths.

The bogus self-employed culture has also created skills shortages in the industry as companies, which do not employ any workers, are therefore unwilling to train apprentices. Sites relying on bogus self-employment are less productive than sites using a directly employed workforce.

Alan Ritchie, General Secretary of construction industry UCATT, said: “Bogus self-employment corrupts the entire industry. Workers are denied basic rights, they fear being sacked at a moment’s notice, so are unlikely to complain about dangerous working practices. If workers become too sick or old to work they will be denied benefits and will not have an old age pension.”

Last year UCATT published The Evasion Economy written by Professor Mark Harvey of Essex University, which examined levels of bogus self-employment in the construction industry. Professor Harvey made a conservative estimate that there are 400,000 bogus self-employed construction workers and bogus self-employment was costing the Exchequer £1.7 billion per annum.

Employers using bogus self-employed workers have the principal financial advantage as they avoid paying 12.8 per cent employers National Insurance contributions on earnings. CIS workers pay a slightly lower level of NI but this results in them having lower benefit entitlements.

Mr Ritchie, added: “CIS is a multi-billion pound Government subsidy unique to the construction industry.  No other industry enjoys such a subsidy.”

The sector of the industry must likely to be affected is housebuilding. This sector is highly casualised most of the major house builders employ few if any workers directly.

For Further information contact Barckley Sumner on 0780 2329235