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Cash-in-hand workers face clampdown

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11/07/2017
A new report into the ‘gig’ economy will recommend bringing thousands of cash-in-hand workers into the tax net.

The Taylor Review will recommend that firms with a ‘controlling and supervisory’ relationship with workers should pay a range of benefits including holiday and sick pay. They should also be making national insurance contributions on their behalf.

Matthew Taylor, a former policy adviser to Tony Blair and author of the report, called on the government to close a loophole allowing companies to pay temporary agency workers less than direct employees doing the same job.

The recommendations are part of wider review into modern working practices, as more people become self-employed and make money through the so-called ‘gig’ economy. Firms such as Uber and Deliveroo, who make widespread use of temporary workers, have come under fire for their working practices. There were 4.6m self-employed workers in the UK in the first quarter of 2016, according to the most recent Office for National Statistics figures.

The government is also focused on the issue, with a recent announcement on giving paternity and maternity pay to the self-employed. The BBC reports that Prime Minister May will say at the launch of the report: “I am clear that this government will act to ensure that the interests of employees on traditional contracts, the self-employed and those people working in the ‘gig’ economy are all properly protected.”

The report proposes a new category of worker called a ‘dependent contractor’, who should be given extra protections. “In my view there is too much work particularly at the bottom end of the labour market that is not of a high enough quality,” Mr Taylor told the BBC.

Taylow emphasised that he didn’t want to stop people working flexibly if that’s what they wanted to do, but instead wanted to prevent companies taking advantage of lower-paid workers. He also suggested that electronic platforms such as Paypal might replace cash payments.

Tom Selby, senior analyst at AJ Bell, comments: “The UK’s five million strong army of self-employed workers are woefully undersaving for retirement, with one survey suggesting just 27% are putting money into a personal pension. While reforms to the state pension introduced last year boost self-employed workers by giving them exactly the same entitlements as employed workers, the Taylor Review acknowledges that most should not be relying solely on the state to support them in retirement.

“Bringing the level of Class 4 National Insurance Contributions (NICs) paid by the self-employed into line with those paid by employed people may be logical given their increased state pension entitlement, but it won’t be easy. The Government has already been forced into one embarrassing U-turn on raising Class 4 NICs and, given Labour’s commitment not to increase personal National Insurance Contributions and Theresa May’s flimsy majority, a second attempt could hit a Parliamentary brick wall.

“Beyond the state pension, the Review advocates extending the principles of automatic enrolment to the self-employed. Using the annual self-assessment tax return to automatically divert 4% of income into a pension, unless the individual opts-out, is a pragmatic approach.”

Royal London’s Director of Policy, Steve Webb, said: “We welcome the Taylor Review focusing on the gaps in retirement saving for the self-employed. Our research shows that the lack of retirement provision amongst the self-employed is reaching crisis levels, and needs to be addressed. The Government now needs to build on the momentum for action in this area and take forward the proposals on pensions and auto-enrolment as a matter of urgency.”

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