back to article Gig economy tech giants are 'free riding' on the welfare state, say MPs

MPs have slammed the "bogus" self-employment practices of so-called gig economy companies – accusing the likes of Uber, Amazon and Deliveroo of passing the buck on to the welfare state. In a report published on Monday, Parliament's Work and Pensions Committee urged the British government to close loopholes exploited by gig …

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A long time coming

A government report ( or commitee) that actually speaks the truth and makes some sensible suggestions.

Other governments should take notice.

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Re: A long time coming

It is a temporal pre-election anomaly while they are looking for some votes (and in the labor case money from the Unions). Do not worry, it will pass.

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Anonymous Coward

Re: Whats this GUI thingy?

To be fair, Frank Field is normally pretty good (and consistent) on this sort of thing. There's very few MP's I'd consider honourable (for at least some version of honourable), but Frank Field is one of the few.

There's a few good reasons why he's never held senior cabinet office:

1. He tends to say what he thinks, though not quite as forward as The Beast of Bolsover.

2. He knows what he's talking about. This is a massive drawback as most cabinet ministers are clueless. I point out Amber Rudd, the PM and IDS as perfect examples.

3. He thinks through things and comes up with solutions that people don't like, because they tend to be thought through but also because they cost money. Most cabinet ministers are there to save money for the election.

When Frank speaks, its usually a good idea to listen. You may not like what he says, but he's not often wrong.

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Re: A long time coming

Other governments should take notice.

Never mind other governments; this government should take notice, along with the winner on 9th June.

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Re: A long time coming

It is a temporal pre-election anomaly while they are looking for some votes (and in the labor case money from the Unions). Do not worry, it will pass.

Nope. This report has been a long time in the making and is not related to the election. These companies are doing active harm to the state's budget. Employees don't care because they're covered by the state and obviously the companies are getting away with bloody murder.

Both left and right understand this is a problem - I'd expect to hear more about this long after the election.

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Re: A long time coming

"Never mind other governments; this government should take notice, along with the winner on 9th June."

And I think they will - I'm guessing there's a ton of PAYE they're not getting as a result of delivery drivers, etc, being "self employed" (translation: disenfranshised slaves). And I wouldn't mind betting that a lot of people doing jobs like this also qualify for a load of benefits owed to those on low wages; from the government's budget point of view it's far better to get these people working on proper and humane full time employment contracts with at least the minimum wage.

Basically, if they work out that the tax payer is subsidising Amazon, Uber, etc whilst not receiving adequate tax from such companies, they'll start to act. It will take time - see below. And there's some precedent; Mark Carney told the bank that he would not support them if they were "socially useless". That put the heebbie geebbies up them. Ok, so he's not the government, but it's encouraging to think that there's limits to the extent to which national bodies will tolerate corporate behaviour.

Plus, to take it away from the seedy realms of politics, it's looking like the employment tribunals don't particularly like the "gig economy" either (ref: Uber vs drivers). The judgement of the tribunal is made against employment law background which, so far as I know, enjoys unchallenged cross party support (at least on the parts relevant to the recent tribunal).

In my view it would be good if there was a general law to prohibiting this kind of thing. We already have specific laws, but the enforcement route is problematic - it takes an employment tribunial in each case. It's difficult to prohibit (in the general sense) "self-employment" without cocking up, for example, the arrangements for a one-man-band-IT-contractor. Getting this right will take time...

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Unhappy

"These companies are doing active harm to the state's budget. "

Corerect.

Their behavior is in fact trebly despicable.

1)Rely on the welfare state to cover for anything outside basic pay.

2)Avoid paying their taxes

3)B**ch continuously about how taxes are too high, they are over regulated yadda yadda.

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Re: A long time coming

Unfortunately, it's not just the disruptive new economy's low wages that exploits the welfare state. For example, supermarkets employ thousands of young mothers in poorly paid part-time jobs (necessarily because they have to look after kids out of school hours). Benefits, especially housing benefit, make up the difference. Food shops depend on cut-throat pricing and we consumers won't pay more.

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Unhappy

Re: A long time coming

And I see we have a serial downvoter here.

Some apologist for Uber?

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Conflict

Awkward as Conservative poilcy for ages has been to hammer worketrs and make UK a low skill, low wage economy - hence doing nothing to stop the precarious "employment" issue of zero hours contracts & quite happy with fake self employed status as (ab)used by some of their big mates in the building industry - only reacting as the self employed abuse is being used by more and more companies & shock horror some of these companies are not their cosy donation / jobs for the boys / girls mates.

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Finally someone's noticed?

It's been obvious for years that companies who insist that their 'employees' are free-agent contractors are doing it mostly to avoid the legal requirements of an actual employment contract with all the rights and requirements that this would encapsulate. Y'know, the little things that hardly matter like sick and holiday pay, job security, pensions and the like. Things like requiring these 'contractors' to pay consolidated damages when they can't provide their contracted service is surely only a courtesy detail...

But it has the wonderful advantage that it's not the company that's underpaying their 'employees'; it's their 'contractors' who aren't working hard enough, or who have failed to negotiate a suitable rate - and of course it's the 'contractors' who are blamed because they suddenly have to go cap in hand to the welfare state. It's not the company's fault, naturally...

That someone in full-time employment, no matter how it is disguised, requires state aid to live is unjust, inequitable, unfair, and a damned disgrace. The sooner this sort of employment is at least severely curtailed, the better.

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Meh

Re: Finally someone's noticed?

Or maybe just "finally there is an election on", so they all have to look good until polling day.

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Re: Finally someone's noticed?

Or maybe just "finally there is an election on", so they all have to look good until polling day.

After which the regulations will no doubt be reduced even more.

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Anonymous Coward

Re: Finally someone's noticed?

That someone in full-time employment, no matter how it is disguised, requires state aid to live is unjust, inequitable, unfair, and a damned disgrace. The sooner this sort of employment is at least severely curtailed, the better.

Amen to that. The problem is that the fines and punishments never quite hit where they should. If a court could convict the CEO and board to live like their workers for a year, on the same pay and in the same conditions, I reckon it would be addressed before you'd finished reading this post..

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Re: Finally someone's noticed?

Frank Field usually talks sense, but if he's actually listened to is another thing entirely...

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Meh

Re: Finally someone's noticed?

"but it has the wonderful advantage that it's not the company that's underpaying their 'employees'; it's their 'contractors' who aren't working hard enough, or who have failed to negotiate a suitable rate - and of course it's the 'contractors' who are blamed because they suddenly have to go cap in hand to the welfare state. It's not the company's fault, naturally..."

Remember if a company's workers are claiming state benefits then the tax payer is also subsidising that company. The company involve are not only dodging their tax obligations, they're getting labour part paid for by the government instead of paying the full 'market' rate.

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Re:all have to look good until polling day.

Abosolutely not. Because here is a policy change that looks good socially and increases the tax take. Every politicians dream.

The down side is that self employment is going to get more and more heavily cracked down on. IR35 will be only the start.

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Anonymous Coward

Re: Re:all have to look good until polling day.

IR35 does not apply to the self-employed, because by definition there must be an employment relationship in place to be subject to employment intermediary tests. Thinking that you're self-employed when you're employed by your own company is usually a good sign you're in breach of IR35.

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Re: Finally someone's noticed?

"Remember if a company's workers are claiming state benefits then the tax payer is also subsidising that company."

In the same way, housing benefit is basically a transfer of taxpayer money to private landlords. It arises because people are not being paid enough to afford rents, but also the existence of housing benefit tends to drive up house prices and rents.

If people were adequately paid there would be no need for housing benefit, which means a market distortion would be removed and rents would be a free market that the Conservative Right are so in favour of, would they?

(But they don't want free markets, of course. They just want markets in which it's their thumbs on the scales, not someone else's.)

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Re: Finally someone's noticed?

"housing benefit is basically a transfer of taxpayer money to private landlords"
That depends. Here in Oz Centrelink pay the rent subsidy to the tenants. The tenants use the rent subsidy to purchase drugs and the landlord ends up evicting the tenants after a long battle to be allowed to do so. Yes, this ends up driving up rents, but that's what the government in its wisdom appears to want. That and cheaper drugs.

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Anonymous Coward

'worker' status to the drivers

I would applaud that. In real world however, this will only speed up - the inevitable - shift to "autonomous" driving vehicles and the welfare state will pick up the tab anyway.

Has ANYONE really counted what the likes of amazon and google have EVER done to us, other than being disruptive? Because they waffle on about 1,000 employed employed here and there, while at the same time f... the budget royally. Somehow I don't think a few thousand people being (self)employed make up for this.

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Re: 'worker' status to the drivers

On one hand yes. On the other hand this trend would be even faster as businesses can invest more into "R&D" while they don't have to spend on workers. It's about greed after all.

I'm trying to limit my spend on Amazon and other to big to fail corporations (no need for Uber or alike) as I don't see the need to support them unless necessary. Sometimes it's inconvenient but even then it's simply money saved.

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Re: 'worker' status to the drivers

Autonomous vehicles will need R&D and more frequently - maintenance. You can also bet your behind that the government will come up with new ways to extract money from them in new taxes etc.

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Windows

Time for a turnover limit on IR35?

Bogus self employment has been a target for decades where minimum wage slaves are forced to be "self employed" to save money for their "employers".

This has had an impact on those (a much smaller number) higher up the value chain, such as IT consultants and radiographers.

So it is probably time for a new set of guidelines for those above a certain billing point. This would allow different treatment for those earning enough to fund their own training, healthcare, holidays etc. and protect those who are paid so little they can't afford to be sick.

Difficult to pick a cutoff point - perhaps a multiple of the living wage?

Rough calculation (not minimum/living wage): £5 an hour for 8 hour day for 200 days a year gives you £8,000 a year. Three times that rounded up gives you £25k a year. Possibly a cut off point? If you are billing over £100k a year you probably don't need protection from modern day slavery.

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Re: Time for a turnover limit on IR35?

"If you are billing over £100k a year you probably don't need protection from modern day slavery." I'd imagine there will be people billing over that but after overheads will taking home less than the living wage it their 'employers' can work out ways of loaning them the money for cars, being off sick for a day etc etc.

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Re: Time for a turnover limit on IR35?

https://www.youtube.com/watch?v=L2tWwHOXMhI

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Meh

Re: Time for a turnover limit on IR35?

Time for scrapping IR35. People are either employees or they are not.

It was intended, nearly 20 years ago, as a tax-grabbing wheeze - let's call these bastards "disguised employees" so we can tax them as employees, but we won't give them any of the rights associated with employment.

Either you are a "disguised employee" - i.e. you are just an employee, but wearing dark glasses and a hat - and so you and your employer get all the rights and duties associated with employment, or you are not an employee - disguised or otherwise - in which case you and your client get neither.

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Anonymous Coward

Re: Time for a turnover limit on IR35?

IR35 is to stop the tax dodging bastards, not a tax grabbing wheeze. Down vote away you hive of consultancy scum.

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Re: Time for a turnover limit on IR35?

"IR35 is to stop the tax dodging bastards"

If you think it's just a tax dodging wheeze why aren't you taking advantage of it yourself? Would it offend your moral principles or don't you fancy the risk of stepping off the edge of permie status? If the latter then you might like to reconsider and wonder if may there's something in this notion of freelancers being businesses and being a business not the same as being employed?

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Definitions of employed/self-employed ?

I always thought that the distinction between "employed" and "self-employed" was along the lines of:

"Employed" - you work for someone else in "their" company (either full time or part time)

"Self-employed" - you work for "your own" company (even if providing services to someone elses company)

So, drivers for Uber et al should be called "Employed" as they are working for someone elses' company. In theory, by my own definition, Uber drivers could be working for themselves, but providing "services" to Uber.

In which case, I would further refine the above to:

"Employed" - you work for someone else (exclusively) in "their" company (either full time or part time)

"Self-employed" - you work for "your own" company (and/or you are providing non-exclusive services to more than one company belonging to someone else)

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Re: Definitions of employed/self-employed ?

There are three, employed, self-employed, and worker. A worker covers all employed and some self-employed (usually when they are being exploited, like Uber drivers).

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Anonymous Coward

Re: Definitions of employed/self-employed ?

When I win the election, I'll insert a 'living wage' section in the law on unfair contracts. Any organisation that contracts a service at a rate that won't pay the contracted staff/person the living wage + pension/holiday costs in respect of the work done (calculated hourly, and appropriate to where the work is carried out) is subject to a fine of 100% of the CEOs salary and bonus, per offence.

At a stroke we sort out the 'unfairness' of the gig economy, care firms not paying travel time, and sweat shops in the 3rd world paying slave labour rates.

So vote anonymous, vote often!

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Anonymous Coward

Re: Definitions of employed/self-employed ?

what's a holiday?

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Re: Definitions of employed/self-employed ?

"Employed" - you work for someone else in "their" company (either full time or part time)

"Self-employed" - you work for "your own" company (even if providing services to someone elses company)

Not really. If you work for your own company you are "Employed" (by the company which is a legal entity). Directors are employees.

"Employed" you don't have to work for a company. You could be employed by a partnership or sole trader, neither of these are incorporated. You could even be employed by a non-trading individual (i.e. as a nanny, cleaner, groundskeeper etc.)

Self-employed in most cases means in a partnership with someone else or operating as a self-employed sole trader.

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Re: Definitions of employed/self-employed ?

It should be easy to tell the difference between employment and self-employment: are you free to accept or decline jobs at your own discretion, without facing sanction from someone else? And do you set your own price?

If you get offered a job to tile the bathrooms on the Death Star, and you can say "No thanks, that job's not for me," or "OK but it'll be twice my normal rate," then you may be self employed.

If you get told to pick up a big guy in a cape and drive him to the Death Star, and you have to take the job because the Death Star is in your area and Uber will de-list you if you refuse it, even though the tolls on the Yavin bypass make it completely unprofitable, then you're Uber's employee.

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Re: Definitions of employed/self-employed ?

The way uber see it, the drivers are self-employed minicab drivers. The drivers are contracting Uber to provide them with a dispatch and billing service. To be honest, that seems like a fairly reasonable interpretation of the rules to me and it is stuff which has been going on for a long time. Uber just happen to have put a hi-tech face on it.

For example, Anne Summers party hosts also count as self employed rather than as salespeople for Anne Summers (which is clearly what they are). If we're going to insist on uber drivers counting as employees then we need to count them as employees too (and people running Costa Coffee franchises, and Weight Watchers groups, etc, etc). Maybe that's a good idea, maybe it isn't but either way I don't see this as an uber problem or as a new problem.

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Re: Definitions of employed/self-employed ?

Uber fails for two reasons. 1. You can not set the price or negotiate the price. 2. You can not decline jobs.

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Anonymous Coward

Re: Definitions of employed/self-employed ?

"are you free to accept or decline jobs at your own discretion..."

It's actually a bit more detailed than that. If you're not free to work to your own direction (e.g. you are integrated into a single delivery team with loose terms of reference) or you're not free to be replaced by some other similarly qualified resource you are almost certainly an employee in fact.

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Anonymous Coward

Re: Definitions of employed/self-employed ?

"replaced by some other similarly qualified resource you are almost certainly an employee in fact." Not in the US. I'm an independent contractor and I have a clause in my contract that says no substitutions. Other than that I'm free to take jobs/decline,negotiate prices say were I want to work

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Re: Definitions of employed/self-employed ?

"Employed" - you work for someone else in "their" company (either full time or part time)

"Self-employed" - you work for "your own" company (even if providing services to someone elses company)

No. Self-employed is a fairly specific thing however much the HMRC try to muddy the waters.

If you're self-employed you can provide a service or trade goods and the money that the customer pays is your personal money. You may, however, have liabilities such as tax and NI and the ability to set your expenses against the income before taxes are levied. You'll also have liabilities for any other costs you incur and those liabilities fall directly on you, personally. You are the business; there's no distinction. You could, for instance, buy a bucket, a ladder and some cleaning materials and set up as a self employed window-cleaner tomorrow. If nobody wants their windows cleaned or you go on holiday or fall sick, tough. There's no money coming in and your only fall-back is on the dole under whatever name it's going ATM.

What I've just described is a sole trader. Another variation is a partnership. You can go into partnership with someone else with two buckets and two ladders as a window cleaning partnership. Much the same applies. Any money you take becomes your joint property as partners and it's up to you to divvy it up but you still have personal liabilities. In fact those liabilities are on both of you for the actions of either - your partner screws up and you could still be liable for whatever it costs.

An employee doesn't receive money that's paid for the whatever the business delivers. The business, whether it be a sole trader, a partnership, a limited company, a PLC, a charity or a public sector receives the money and pays the employee. The employee will have to pay income tax and NI although the NI rates are different and there's also an employer's NI to be paid. The employer will also have to find sick pay and holiday pay. The business and the employee are two separate entities. One thing that should be made clear here is that if you're in business as a self-employed window cleaner the your customers are just that, customers; they're not your employers.

There's no real obstacle to a company engaging a specialist worker (to use a generic term) on a self-employed basis. There is, however, a risk and that's a ruling some time ago that if the sole trader were to default on tax payments the IR (as it then was) could look to the engager (again, to use a generic term) to make good. This, AIUI, was what brought the limited company freelancer to the fore; clients were more likely to be comfortable dealing with a limited company rather than a sole-trader as the ruling did not apply to a worker engaged on that basis. It's not essential to structure the arrangement through a limited company. I came across a client who, I discovered, engaged graphic designers as sole traders and they actually had their own form contract for this.

It should be clear from the above that when a freelancer works through a limited company they are not self-employed. It is the company that is the business that receives payment from the client. The company has its own tax liabilities such as corporation tax and employees NI and its own rules about expenses. It's up to the company's management and ownership (who are probably identical with the employee(s)) to decide what payments it makes to its employee(s), subject, of course, to any limits on what it can afford and company legislation about solvency. It also needs to distribute salary payments through sickness, holidays and slack periods. As a company, of course, the business is subject to a good deal more legislation than the sole trader. It needs to go through the necessary legal formalities to be incorporated and it needs to produce the appropriate annual accounts to submit to Companies House. It has more freedom to distribute income as dividends, which have their own taxation arrangements, as well as salary and to retain some of its income when things are going well in order to be able to make payments when they're not. It is also the company which assumes any liabilities and not the employees.

For a small company the same person might be shareholder, management and employee. Nevertheless they are separate roles unlike the sole trader where the person is the business.

NB Occupations which are regulated create exceptions. Anyone can set up as a self-employed window cleaner but not as a self-employed medical practitioner unless they have the appropriate qualifications and registrations. OTOH there may be instances where the professional is obliged to bear personal liability even if they are an employee although the employer may pay for professional liability insurance.

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Re: Definitions of employed/self-employed ?

"what's a holiday?"
Retirement! :-)

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Re: Definitions of employed/self-employed ?

"Not in the US. I'm an independent contractor and I have a clause in my contract that says no substitutions."

That's an interesting situation. It seems to be established in UK case law that that would be an indication of employment. And yet the IR themselves, as they then were, had a sample contract on their website at one time for companies to supply services to themselves. It made provision for them (a "key man" clause) to nominate individuals on the suppliers team who could not be replaced without the IR's agreement. It was a sensible clause given the tendency of big services company to put forward a high powered team to make the pitch and then run the contracts on recent graduates, YTS trainees or work experience kids if they could get away with it. But when does a key man clause in a contract for services become a non-substitution clause that marks the contract as a disguised employment contract?

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Anonymous Coward

Re: Definitions of employed/self-employed ?

"But when does a key man clause in a contract for services become a non-substitution clause that marks the contract as a disguised employment contract?"

The difference with a typical services engagement is that the people covered by "key man" clauses are bona fide employees of the company delivering the services, with NICs, income tax, sick pay and holidays fully accounted for. While the contractual relationship may be indicative of employment, the point is moot as there is no attempt to act as an employment intermediary. They also usually have their own lines of reporting and management, further distancing them from the client's organisation.

Remember the purpose of IR35 is to identify and tax people trying to disguise what is an employer-employee relationship as something else (e.g. services delivery contract).

There are also other "outs" from an employment relationship. A common one being well-defined terms of reference. If you are engaged for a specific task and solely act to deliver that task within a well defined scope, upon which the relationship is terminated, you are almost certainly not an employee. This covers the genuine specialist use case of a short term (<3 month) deployment of some niche skill. In that scenario you could well be a "key man" but you're not an employee because you're being paid for a concrete deliverable rather than just your time.

Start repeating that 3 months contract like clockwork every 3 months for an extended period and the situation changes.

tl;dr don't do long-term T&M "as directed" engagements and you're fine.

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Re: Definitions of employed/self-employed ?

"But when does a key man clause in a contract for services become a non-substitution clause that marks the contract as a disguised employment contract?"

The difference with a typical services engagement is that the people covered by "key man" clauses are bona fide employees of the company delivering the services, with NICs, income tax, sick pay and holidays fully accounted for.

A company is a company to paraphrase someone or other irrespective of size. Therefore there should be no reason to take a substitution clause as equivalent to a key man clause.

The primary problem with IR35 determination is that although it's supposed to be based on the balance of probabilities it doesn't consider the probability of the contract being what it states itself to be, a contract for provision of services. If a clause would be unexceptional in a contract with, say Capita, for provision of services then it should be equally unexceptional in a contract with VerySmallFreelanceCo. And that goes with "as directed", long contracts or any other clause. Why should the individual service provider be discriminated against relative to the Capitas of this world?

The entire assumption of IR35 is that there is such a thing as a disguised employee. And yet if you take into account the way in which the freelancer relates to the engager it differs in many respects from an employee. If a freelancer is asked - or told - to work on such and such a task today does that make him an employee? You think so? OK, you engage a sparky to change a single socket for a double in your living room; does that make him an employee because you told him which particular socket to change?

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Unhappy

Re: Definitions of employed/self-employed ?

>>"what's a holiday?"

>"Retirement! :-)"

What's retirement?

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Unhappy

Re: Definitions of employed/self-employed ?

>> "what's a holiday?"

>Retirement! :-)

What's retirement?

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"it is up to government to close the loopholes"

At last a report which doesn't blame the companies themselves, but places the blame squarely at the foot of the government for not closing the loopholes in the first place.

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Re: "it is up to government to close the loopholes"

"At last a report which doesn't blame the companies themselves, but places the blame squarely at the foot of the government for not closing the loopholes in the first place."

So if there's a loophole in the murder law that let's me kill you, and I did, that would be the Government's fault as well? It#s the Government's fault for not closing the loopholes and it's these companies' fault for being absolute bastards. It's not a legal requirement for firms to be twats, the whole maximize profit law thing is a lie, as in it doesn't exist.

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Devil

Re: "it is up to government to close the loopholes"

Ah yes. Corporate's favourite excuse.

"It's not our fault we hide our profits through umpteen different bank accounts/sub-companies/countries! It's the loopholes we found in the Government's tax policies that are making us do it!"

"It's not our fault we treat our workforce as disposable peons with no employee rights! It's the loopholes we found in the Government's employment policies that are making us do it!"

"It's not our fault we're heartless, ruthless capitalists, grinding our workers down and diverting profits into our pockets. We found loopholes in the law that allows us to do it, so therefore we must!

"For pity sake, we're the victims here! It's up to the Government to save us from this enforced evil-doing!"

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