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The role of a successful Government should be to facilitate the development of industrial sectors, legislating only when required in order to protect a level playing field and ensure fairness and equality in the market place.
The structure of that market place has evolved through the laws of supply and demand. If there was a willing ‘buyer’ and a willing ‘seller’, there was scope for a business arrangement. To add value to the market place, there might be scope for a ‘middle-man’ to put the buyer and seller in touch with each other.
As technological advances pushed back the boundaries of traditional business arrangements, so the market dynamics altered to accommodate new practices and methods. Enterprising businessmen and woman saw how they could utilise these developments, and in some case, push back the boundaries themselves, by creating flexible working arrangements to better match the supply and demands of a changing workforce.
However, just as the market needed to evolve without artificial constraints and barriers - so the amount of red tape and bureaucracy pouring out of Whitehall and Brussels - often finding its genesis in the think tanks dominated by large corporations – was threatening to drown this new flexible economy.
In July 1999, DTI’s Secretary of State, Stephen Byers, promised ‘anxious business leaders: no more Red Tape; putting a block on new and burdensome regulations until the next general election.’ (Daily Mail, July 15 1999).
However, in the same year the Institute of Economic Affairs in its ‘Regulating European Labour Markets: More Costs than Benefits?’ concludes that the overall results of this new wave of legislation are likely to lower the level of employment in the UK economy and to reduce its labour market flexibility.
IR35, the Government’s so-called stealth tax, also seeks to interfere with the natural order of the market case and create an artificial category of business or person- AKA; Government Modified (GM) business.
This GM business has all the hallmarks of flawed and unwanted creation. Prior to its creation, the independent consultant ran his or her own small business selling knowledge, expertise and experience to a client who wanted to purchase that commodity in a competitive market place. The contract was for a specific service in a deal between two businesses – perhaps with a broker or agent in the middle.
All parties had certainty about the arrangement. The supplier did not seek protection or benefits from the client in line with those that an employee might receive, because patently he or she was not an employee. Equally the client was prepared to pay a competitive market rate for the service, out of which the contractor took the risks and stood to benefit from the rewards of managing his own business.
By unnecessary interfering with this balance, the GM business is neither one thing nor another. It is prevented from growing, as it is unable to make a profit; it is treated as an employee in terms of paying tax and NI; its turnover is treated as salary; it does not receive the benefits of employment. The client is caught in an uncertain world; the agent cannot add value in a climate of such confusion. In short, all parties suffer by a situation which no-one wanted.
It is hardly surprising then, that more uncertainty and confusion emanates from this state of affairs.
The Government has until July 2001 to implement the European Directive on Fixed Time Work into national law. Its purpose is to provide that fixed-term employees should receive no less favourable treatment with regard to employment conditions than permanent staff unless different treatment can be objectively justified. It also requires members states to introduce restrictions on the duration or number of renewals of fixed-term contracts or to specify that fixed-term workers can only be used for objective reasons.
On the face of it, ‘businesses’ offering their services through an agency should be exempt from this. But the Government’s vague definition of a disguised employee is one who operates on a ‘standard agency contract of more than a month’s duration’.
Already this is leading to unconfirmed speculation and knee-jerking within the media and other organisations. Earlier, this week, the Daily Mail carried out a kite-flying exercise that the Government was intending to give employee rights to up to four million self employed people, whom, it was feared, could be abused by ‘big business’. Within hours this rumours was being commented on and analysed as if it was fact.
Hardly, surprising that rumours and suspicion grow so quickly in this artificial fertilizer of fear, uncertainty and doubt.
So if the Government is intent on creating a GM business, it is not beyond the realms of possibility that there will soon also be a GM employee. This week, in the USA, the media giant Time Warner reached a settlement with the Department of Labour for $5.5 million regarding a claim that the company illegally denied full-time workers pensions and health benefits by classifying them as temporary or contractors. This follows another court ruling where Microsoft’s ‘permatemps’ won a victory to entitle them to share options in line with ‘employees’
This disruption in the market place is already causing confusion and chaos and it is likely to continue for some time as small businesses, agents and clients are forced to redefine themselves and their relationships with each other.
In time, the Government may come to realise that by interfering in the thriving knowledge-based economy, it has done irreparable damage to UK plc. By then, it will be too late to put the genie back in the bottle.
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