With last week’s appeal court decision against one of the capital’s most established and well know companies, Pimlico Plumbers lost a legal battle against one of their contractors. They employed a contractor, who was self-employed, who owned their own Ltd company that was also VAT registered and payed their own VAT and taxes et al. How does this bode for SMEs and business leaders across the UK?
Do you employ self-employed contractors that are Ltd-VAT registered companies? According to last week’s court decision, it now seems, that if you employ a Ltd, VAT registered company that wears your uniform, uses your vehicles or even uses your I.D or even your business cards your contractor could, possibly, have full employee rights.
Are we therefore entering in to a new legal system of employment laws that are changing 20th century laws and values in to unrealistic 21st century new laws?
What could this mean for you as business owner? Here Charlie Mullins OBE of Pimlico Plumbers talks to us in his own words.
Last week my company, Pimlico Plumbers, was on the receiving end of a what I can only describe as an illogical Appeal Court decision, which will, I believe, have major ramifications for the UK economy unless the government takes urgent action to clarify employment law.
The court upheld two previous Employment Tribunal decisions, which said that a plumber, who worked for me on a self-employed basis for six years, was in fact a ‘worker’, and as such was entitled to employment rights such as sick and holiday pay, as well as the ability to sue for things like discrimination.
The plumber concerned, Gary Smith, had signed a self-employed contract with my company; paid corporation tax at 20 per cent; was VAT registered; used his materials and charged a mark-up for them; paid his wife and an accountant to work for his business, and claimed tax relief for having a home office. But the court still decided that he was not self-employed.
There is no doubt in my mind that Gary Smith understood that he was self-employed, and took full advantage of all the benefits that status offered him, including earning in excess of £80,000 per year. However, having enjoyed the advantages of being self-employed for six years, he decided he wanted to have his cake and eat it, and demanded to be treated as an employee.
This judgement has been reported hysterically in the press as an example of a so called “gig economy” company getting its comeuppance for exploiting a worker, to increase profits and short change the taxman.
This of course couldn’t be further from the truth since tradesmen contracting to Pimlico Plumbers are the best paid in the country, with many taking home well in excess of £100k. And anyone with a command of basic maths will agree that a self-employed trades’ person on £100k paying corporation tax at 20 pr cent (£20,000) is better for HMRC than one making £40k on PAYE (£9,600).
The threat to UK PLC from this Appeal Court decision is real and present, because our reliance on self-employed workers in recent decades has – accelerated by the last recession – reached a critical point. Some industries, the media, the building industry, and interestingly, government, would struggle to function without self-employed contractors.
And it’s not only large corporates like Uber and City Sprint who should be worried about last week’s judgement. In fact the SME community, as the least well-resourced to fight back legally, could well find itself staring down the barrel, if the government doesn’t remove the danger of this judge made law through the use of legislation.
At the crux of the problem I think is the fact that increasingly what we have is a collection of antiquated 20th century industrial statues trying desperately to make sense of the 21st century social and working environment, and failing dismally.
It’s not all doom and gloom though, and in the government’s review on modern employment practices, headed by Royal Society of Arts Chief Executive, Matthew Taylor, there is hope. Mr Taylor has described the current system as being very “complicated” and voiced a desire to reform the system to something that is ‘fair and decent’.
Let’s hope Matthew Taylor is, as he seems, a free thinker, capable of seeing beyond tabloid characterisations of villainous employers and exploited workers. If so, perhaps there is hope that the thousands of decent companies legitimately using self-employment based business models, will get a fair hearing.