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Warning about dangers of reclassifying temporary staff

by Susie Hughes at 10:57 22/04/16 (News on Business)

Agencies that advise employers to reclassify temporary staff as 'unsupervised' are putting both their end clients and their directors in jeopardy, according a contractor management company.

CXC Global EMEA has warned agencies that following the advice laid out by one recruitment firm recently to reclassify their temporary workers could result in huge fines for their end clients as well as significant punishments for the organisation’s directors. According to an article in the Guardian, a leaked report showed that a recruitment firm advised some of Britain’s top construction companies to reclassify temporary staff on some of the UK’s largest building sites as 'unsupervised' in an effort to avoid a clampdown on a tax loophole. The Chancellor, George Osborne, introduced measures earlier this month designed to tighten rules on how contractors and temporary workers can claim tax relief on their travel and subsistence expenses. According to the legislation, any self-employed professional who doesn’t require the ‘supervision, direction or control’ (SDC) of their employer can claim these tax breaks, while all other workers cannot. A presentation leaked by the Unite union has found that one recruitment firm has advised its clients to reclassify temporary staff as “unsupervised” in an effort to avoid the clampdown on the loophole. Wrong However, this advice has met with concern in some quarters. Michelle Reilly, managing director of CXC Global EMEA said: “It’s simply wrong to advise businesses and professionals not to operate under SDC. The classification is down to HMRC’s interpretation and advising firms in this way is incredibly risky, particularly when they and their board of directors can be held personally liable. "After all, nothing ruins a business relationship like a huge fine for the wrongdoing of one of your suppliers. Advertisement However, the Government must also take some of the blame for agencies adopting this approach. While they’re clear about putting in place overly restrictive rules for the contractor workforce, they’re certainly not clear about how to test for SDC, which leads to situations like this where agencies are essentially making up their own rules. Let’s be clear – this particular agency is in the wrong, but the Government also has a part to play.” “Umbrella companies currently operate a three step test which tests for the presence of SDC and involves a questionnaire, a rates based system and an assessment of the contract itself, which isn’t robust enough to provide a level playing field for contractors. "Here at CXC, we’ve completely moved away from this model and believe that unless a contractor or temporary worker is operating through their own Ltd Company, they should be classified as a PAYE employee. And to manage this change and better reflect the service we’re providing we’ve reduced our margins, which benefits contractors. If professionals want to be paid the money that they’re missing out on from travel and subsistence tax breaks, then that has to come from the agency or the end client, not from HMRC.” Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2016

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