Monifa Walters-Thompson, Customer Success Manager at Onfido, looks at the ways in which a new legislation, taking effect on April 6th, will affect On Demand workers.
As of tomorrow, April 6th, individual contractors who are under "Supervision, Direction or Control" of the party they are contracted by will no longer be able to claim expenses for travel to their regular place of work, or for subsistence costs. Gov.uk have clearly set out expenses for those who count as self-employed here. This means that a number of people - including On Demand workers - are being excluded from the banner of ‘Self-Employed’ and will feel the full weight of travel costs.
Why have these changes come into force?
In 2000, the government made the regulation IR35 to limit the number of contracts in which people would gain the benefit of being self-employed. Since then, the government have had pseudo self-employment in their sights, wanting to cut down on the benefits for those who are not in reality taking on the risks of being self-employed. Benefits such as tax-deductible expenses were highlighted as 'unfair' by George Osborne in the run up to the Budget.
What do we understand by "Supervision, Direction or Control?"
If anyone is appointed to oversee the contractor, to check the quality of their work or to assist him or her in developing their skills, then they are being supervised. If someone is giving the contractor instructions, then they are being directed. If someone can change the contractor’s shifts, or tell them to work on a different job, or dictates how work is done, it means they have control over the contractor.
What does it really mean?
On practical terms, the change in legislation means that many people who qualify as contractors and do take on an element of risk in their work will still be affected by this. Find below which categories will fall within the scope:
Individuals using an umbrella company to reduce the admin work associated with being self employed. Since the umbrella company works your taxes for them, they take their timesheets and use them to calculate how much PAYE they owe. Since timesheets will have to be signed off by a manager, the role falls into at least the ‘under supervision’ category.
Individuals using a recruitment agency to assist in their revenue stream. Again, if they have an involvement with the contractor that continues during their independent contracting, such as: they pay them directly; they view their timesheets; they do some element of review of the contractor's work - then again they will no longer have the advantages of travel and subsistence expenses.
NOTE: Most people use a combination of umbrella companies and recruitment agencies.
- Lone contractors who receive specific job instructions from a client. From the above options you can see that the new rule is broad and affects a number of people who are taking on significant risk within their net. Now fear of this rule should pile up next to the fear of IR35, and ultimately land contractors who are not completely independent in a position where they lose out. This is not even taking into account the fact that "Supervision, Direction and Control" must only exist in principle.
Take a look at these examples, which have been formulated for individuals to assess whether they are within the scope or not. I would recommend reading the entire cohort in order to get a proper feel of what the government is trying to convey. However, I have tried to make sense of them myself, and here are some highlights:
The Website Designer
Vishal is an IT Consultant who builds websites. He uses an employment business to find clients. Through this, he is linked to a retail company that wants him to design their website. Vishal shows the company his previous work and they show him the products he needs to sell. He is given free reign on how the website will look, and the only requirement is the turnaround time. Vishal works as he wants, both from home and at the company’s business address. There is no intervention from the client, and Vishal finishes his obligation at the end of the engagement.
He is not subject to the agency legislation because he has been given complete freedom to decide and control how he wants to do the work.
I personally think this approach is not realistic, as clients often specify what the website they are paying for should look like. Would this stipulation mean Vishal is under control?
The HGV Driver
- Example #1: Alex is a qualified HGV driver. He has been contracted to do one day of work transporting two pianos. He reports to the factory in the morning at 9 am, as requested. He is then informed of where and when he must deliver the pianos. Alex is allowed to choose his route, he is just required to take the necessary rest breaks and to deliver the piano by 6 pm that day, and contact the manager when the delivery is done. Alex leaves for the day, and rings the manager when the pianos have been delivered to the clients.
In this scenario, Alex has not been subject to a right of supervision or control. He was just told to make the delivery, but not how to make the delivery or the route.
The instruction to take required breaks is not an element of control, as it is a legal requirement.
- Example #2: Alex has a number of deliveries to do on one day across the midlands. He must call after every delivery is completed, and have a document signed. A route is given to him which details the order of deliveries and that breaks should be taken.Someone must also supervise the unloading of the HGV. He is given a number of other instructions, including calling the client in difficulty. The client calls Alex every two hours to ensure everything is done.
It is clear here from the paperwork, extensive instruction, specification and supervision suggestions that Alex is within the scope in this example. He had no freedom to work as he wished.
In this scenario, the client could have called Alex during the run and, therefore, had the right (and the option) to supervise him.
The Security Officer
Yang is a security officer. He is very experienced and a recruitment agency has found him a role with a client. He is told he will be based in a security cabin at the entrance of a secure site. Yang must greet all those authorised to enter and carry out the required security checks, including vehicle and personnel searches. He should also patrol the site and fill in any relevant paperwork. He is under the obligation to report all security breaches immediately and follow the site’s standard procedures.
It seems that Yang may not be subject to supervision or control, as following standard procedures seems normal. However, he does not have any freedom to choose how he does his duties. He cannot design his own security checks or record sheets - he has to follow procedures that were already in place, therefore he is subject to control.
In my opinion, following the company procedures is often a necessity in contracting roles, especially in sensitive areas like security and caring. This example also mentions that if someone can step in to control the work you are doing, this counts as control, even if it isn’t used.
The Drama Teacher
Adela is an experienced drama teacher. She is a contractor and is contacted by a school to run an after-school club for 10 weeks. The headmaster tells her the times of the classes and that it would be nice if the children put on a short play at the end. Adela mentions she is also a skilled dancer, and that she would like to add interpretive dance into the workshop. The workshop runs and Adela decides on how it is taught, although a teaching assistant is always present to watch the sessions. The children are taught a myriad of skills, and they put on a show at the end, after which Adela is finished.
It is stated that Adela is not subject to any supervision or direction - the headmaster wanting a show at the end was a request, nobody was supervising or had any input in directing the workshop aside from Adela.
If there were a curriculum or other stipulated requirements as to how the teaching should be done, then she would have been within the scope of the new legislation.
How does this affect the On Demand economy?
While this change in legislation is targeted primarily at old-school contractors and freelancers - highly qualified and experienced workers performing on a contract basis -, it also affects a new wave of self-employed workers benefiting from the on demand economy.
"It is unfortunate that government regulation impacts a working group that doesn't fit the standard employment mould”, says ,Patrick Penzo, our Sharing and On Demand Economy expert at Onfido. “Regulating the privileges of On Demand workers based on their relationship to the marketplaces on which they operate simply restricts the support marketplaces can reasonably offer their providers”
Deliveroo drivers and Hassle cleaners, among others, work on a freelance basis and have registered for self-assessment, being therefore responsible for paying their employment taxes. However, because these workers are being supervised by the platform - for instance, checking in and out every time they receive and deliver a parcel -, they will fall within the scope and therefore not be able to benefit from tax relief.