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14 Sep 2015

Bogus self-employed denied vital statutory benefits

UK workers who are incorrectly registered as self-employed are missing out on vital employee benefits, Citizens Advice has warned.

According to Citizens Advice’s own figures, nearly 460,000 people in the UK are ‘bogusly’ self-employed and are therefore missing out on holiday pay, sick pay and pensions.

Their survey found that 1 in 10 were thought to be incorrectly registered and were being denied nearly £1,200 in holiday pay and overspending £61 in national insurance contributions than if they were on PAYE or SAYE schemes.

Data from the Office of National Statistics (ONS) puts the total number of people who are working for themselves as up to 4.5million, but Citizens Advice warns that so-called ‘bogus self-employment’ could be costing the government up to £314m annually in lost tax and employer national insurance contributions.

Citizens Advice say that the situation could be partly the fault of employers who believe it is more tax efficient to put their staff onto self-employed contracts rather than enrolling them onto the company payroll as an employee. In addition, ambiguous definitions of what an employee is, as well as the increase in people freelancing on top of their usual careers may have added to the issue.

Mark Beatson, chief economist at the CIPD commented that the factors Citizens Advice had investigated to determine the extent of bogus self-employment which included whether the worker chose their own working hours, provided their own equipment and whether their employer deducted tax from their pay slip was the very reason why so many became confused with legal definitions of ‘employee’:

“Under UK employment law it says you can class individuals as employees, workers and self-employed, but under tax law, there is no ‘worker’ equivalent and you can be one and not the other, quite legally,” he said.

He also added that he did not believe that employers who were forcing staff to register as self-employed were a significant group.

However, The Telegraph reports that employers placing staff on ‘rogue’ contracts would be saving themselves money by not having to pay a range of benefits which would otherwise be compulsory to staff including holiday and sick pay, maternity leave and pensions.

Commenting on the findings, Gillian Guy, chief executive of Citizens Advice said: “Working for yourself should be an empowering experience not an opportunity for rogue firms to siphon away benefits like sick and holiday pay. The Government’s review into self-employment is a welcome opportunity to look at how these workers can be more supported.”

Daniel Hughes

Daniel Hughes, online consultant at Aon Employee Benefits added: “When individuals choose to be self-employed, it can be a rich and rewarding experience. However, it is simply not acceptable for employers to incorrectly register their employees as self-employed thereby denying them holiday and sickness pay and access to a range of other employee benefits such as core funded company entitlements and group risk opportunities.

This article was supplied by Aon Employee Benefits.

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