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Did you feel the earth move?

In July, George Osborne delivered his first unencumbered Conservative budget for 19 years and with it, shook the very foundation of the UK temporary labour supply chain.

We all understand the need for the tax burden of running UK PLC to be shared by everyone. But in attempting to fulfil this aim and by ‘levelling the playing field’, between so-called regular employees and contingent/temporary workers, the Government now risks destroying the ‘golden goose’ which has laid the egg of recent economic recovery.

I am not suggesting for one minute that a dynamic temporary workforce is the sole reason for the UK’s current economic strength. But equally, let us not underestimate the economic value of having such a powerful tool as a flexible workforce. Just ask our EU cousins and see if they agree.

In addition to having regulations to allow for such flexibility, you also need to have a workforce willing to give up employment rights and job security, in order to become flexible and ‘temporary’. The traditional argument goes that the higher rates paid to temporary employees (as compared to an equivalent full time employee) is enough to compensate. But in the real world, where hirers themselves now dictate the price and margin they are willing to pay for temporary labour (rather than allowing market forces alone to dictate), we need a more holistic view of the temporary supply chain, to ensure its continued good health by having workers who want to make that choice.

HMRC believe that the tax advantages currently enjoyed by temporary workers, particularly when dealing with Travelling and Subsistence (T&S) expenses, is unfair. But to whom? Don’t full-time employees have the right to receive tax-free payments to compensate for travelling to and from a temporary work site and for the extra costs incurred while working there?

But HMRC has chosen to compare temporary workers to Agency workers who, because of draconian tax laws dating back to the 1970s, are unable to claim such expenses.
(HMRC deem every single assignment of an Agency worker to be discrete from the next, thus breaking the 40% T&S rules).

These regulations were first applied at a time when the supply chain looked very different and may well have been appropriate for their day. But there is now a vast proportion of temporary workers who have made a conscious decision to become ‘temporary’ and we should not underestimate the benefits this has for our economy. A peripatetic worker (habitually nomadic) simply does not have a regular workplace and therefore the current T&S rules are inappropriate. But to group them for tax purposes with Agency workers demonstrates a true lack of understanding of today’s labour supply chain.

Not allowing such workers to claim T&S expenses while working at a ‘temporary’ workplace is grossly unfair and jeopardises the very sector that has helped lead UK PLC out of recession. Why would a temporary worker choose to remain so, if the tax system so clearly penalises them? Of course, the current rules need some amendments – far too many low paid workers are being herded into arrangements which take an unfair advantage of the current rules. But surely the answer is to recognise and then discriminate between the truly peripatetic worker – one who has made a conscious lifestyle choice to work in this way – and those who are simply an Agency worker in disguise.

The above article was written by Barry Roback FCA, Director at Anderson Group and featured as an Expert Opinion in the August edition of the Recruiter Magazine.

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