Contractors are concerned about their current situation, particularly the zero rights they have under off-payroll rules, meaning they’re not entitled to a minimum number of paid holiday days or to maternity pay, while still having to pay employment tax.
They’re now calling on the government to change this. Two-thirds of contractors are now inside IR35 due to the April 2021 reform and are taking home a lot less money as a result of the legislation.
What is Zero Rights Employment?
This term is related to IR35, as it’s being used to describe situations affecting contractors. In essence, contractors are being taxed as employees under this legislation, although they don’t have the same rights: there’s no security in place and no protection against unfair dismissals, for example.
Thousands of contractors are in these zero-rights conditions, which leaves them facing an uncertain future, particularly because IR35 – and its latest reform – is here to stay and there are no signs of it changing.
Zero-rights employees can be hired and fired at will, which leads to increased stress and impacts their livelihoods without giving them the possibility to appeal decisions like these. Employers don’t even need to be given a reason for firing.
Both the government and HMRC approve these types of circumstances, which many contractors consider disappointing.
What Contractors are Looking for
Currently, 82% of contractors are asking the government to allow them the same employment rights as those in full-time employment if they’re considered to be working inside IR35. With the April 2021 update, more self-employed individuals are now affected by the legislation because employers don’t want to run the risk of making a mistake when determining their employment status.
They’re taking a more cautious approach and labelling a large number of contractors as being inside IR35, which has long since been a concern even before the reform came into effect.
As contractor accountants, we believe this is a serious matter that needs to be addressed sooner rather than later. According to a recent study by Qdos, contractors inside IR35 are seeing their income reduced by about 30%, so it’s not surprising that more and more self-employed individuals are urging the government to, at a minimum, end zero rights employment.
In 2018, the government looked into the issue (PDF) and said that: “Given the views raised by stakeholders, while we are considering whether employment status definitions for employment rights and tax should be aligned, we want to use this opportunity to address the views raised by stakeholders to also consider whether these deeming provisions for tax should be reflected in employment rights legislation.”
However, while this would be a good solution, nothing appears to have changed, and contractors believe the issue should have been addressed before the new reform.
Qdos’ CEO, Seb Maley, says zero rights employment are “illogical, unjust and must be eradicated” and finds it “astonishing that Westminster still has its head buried in the sand, showing how unsupportive it is of the independent workforce, which is arguably one of the UK’s most valuable economic assets.”
Andy Chamberlain, Director of Policy at IPSE, believes that the latest IR35 changes couldn’t have come at a worse time: “compounding the financial damage of the pandemic by not only reducing the work available, but also ensuring that a large proportion of the sector have to effectively work in zero-rights employment.
“[…] The contracting sector used to be one of the most dynamic and innovative parts of the UK economy, but it has been undermined again and again by this government: from the devastating gaps in support to the havoc brought on by the changes to IR35.”
What Can Gorilla Accounting Do for You?
While zero rights employment was already an issue, it has become worse with the introduction of IR35 and its latest reform in the private sector.
IR35 is a complex rule, so it’s important to ensure you’re ready for what it entails if you’re determined to be inside it. We can provide you with specialist IR35 advice at Gorilla Accounting, so speak to one of our experts for more information on how this legislation can impact you and what you can do to minimise its effects.
We’re also limited company accountants, meaning we can support you every step of the way, from when you incorporate your company to when you have to document dividends or prepare your corporation tax return. We can also help you communicate with HMRC; facilitating the process and ensuring that all your paperwork is in order.
And, when you become a client, you also get 24/7 access to our FreeAgent bookkeeping software, which provides you with real-time information and all the data you need to manage your accounts. We will also answer your urgent questions on the same day if you contact us before 3pm.