Sharp growth in false self-employment in construction

Steve Murphy
Steve Murphy

A sharp growth in the use of the Construction Industry Scheme (CIS) in the last full financial year is a clear indicator of an increase in false self-employment in the industry, UCATT has revealed.

A Freedom of Information request by the construction union to the HMRC confirmed that in 2013/14 there were 924,000 workers paid under CIS. This compares with 849,000 workers paid under the scheme in the previous 12 months. The 9 per cent increase (75,000) in the use of CIS came before much of the industry had even begun to recover from recession.

The 9 per cent increase in the use of CIS was substantially greater than the entire increase in the construction workforce. According to the Office of National Statistics (ONS) the construction workforce increased from 1.984 million workers in March 2013 to 2.035 million workers in March 2014. This was an increase of 51,000 workers or 3 per cent.

Steve Murphy, general secretary of UCATT, said: “This large rise in the use of CIS was way beyond the total increase in the construction workforce and demonstrates that false self-employment is out of control in construction. Employers clearly believe that they can falsely self-employ workers and deny them basic employment rights with impunity.”

The figures for the use of CIS for 2014/15 will not be available for some time the figure is expected to reduce as the Government introduced new rules in April 2014, which prevented agencies and payroll companies (intermediaries) from employing workers on a self-employed basis.

Rather than begin to pay workers on a standard PAYE basis following the Government’s changes, many agencies instead introduced the umbrella company model which results in the worker being charged both employer’s and employees’ national insurance contributions (25 per cent of eligible earnings).

Mr Murphy, added: “The huge increase in CIS coupled with the sudden switch to umbrella companies shows that employers will use every trick in the book to avoid paying workers properly. Employers are lining their own pockets at the expense of workers. The only way to end this culture is to abolish CIS and create just two types of workers, employees and the genuinely self-employed.”

In 2012 UCATT estimated that false self-employment in the construction industry was costing the Exchequer £1.9 billion per annum. The principle beneficiaries are employers who avoided paying £1.2bn in employer’s national insurance contributions.

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