Where Labour Market Enforcement Strategy 2023/24 should step in for the contractor sector
The publication of the Director of Labour Market Enforcement’s Strategy for 2022/23 may have been late, but I am hopeful that Margaret Beels is full of good intentions to tackle the issues that are harming the UK’s labour market and economy, writes Crawford Temple, chief executive of Professional Passport.
So I welcome her plans for 2023/24, which the DLME has committed to submitting to ministers before March ends.
The latest in a long line must be heard, surely
As ContractorUK readers probably know, Beels is one of many in a long line of people tasked over the years with devising a strategy to help shape a modern working landscape for the better.
Her predecessor, Sir Matthew Taylor who held the role as interim director, was the architect of the “Good Work Plan” -- another report written to help shape the UK’s working practices for a 21st century Britain.
So we’ve had one report after another full of admirable intentions and proposals that have been met with what Sir Matthew once called a “deafening silence” by the government. Dare we hope that Margaret Beels will be heard by policymakers?
The four themes of Labour Market Enforcement
Beels’ interim report mentions four key themes that she wants to address, namely a focus on:
- Improving the radar picture;
- Improving focus and effectiveness;
- Better joined-up thinking;
- Engagement and support.
In principle, all four themes are to be commended. Underlying all of them is how government, stakeholders and the whole supply chain can work better together to drive out non-compliance and raise standards.
Key for me is open communication, transparency and enforcement. The workplace has radically changed over the last 40 years. The 9-5 workplace has been banished to the annals of history as we have seen a significant rise in the number of people opting to work for themselves as freelancers and contractors.
The rut officialdom is in…
And, along with the prominence of the flexible workforce and the gig economy has come a proliferation of regulation and legislation as policymakers seek to navigate and catch up with the fast-moving pace of the modern working landscape.
But they are still too slow. The net result has seen a rise in criminal activity, tax avoidance, disguised remuneration schemes, labour exploitation. The list of unwanted side-effects goes on. And almost as a kneejerk response, consultations and reports have been published by HMRC and HM Treasury, with a catalogue of legislation ensuing. Worse still, with government often ignoring the advice and recommendations of both stakeholders and industry experts alike, any legislation that has taken effect continues to fail to address the underlying challenges that contractors and others in the labour market face.
Visible enforcement is vital
Enforcement is expensive but without it, there is little incentive to play by the rules.
In fact, I would argue that the lack of enforcement by HMRC, BEIS and others has fuelled the incentive that has allowed non-compliant providers to flourish.
So I would urge Beels to ensure that enforcement does not become more diluted as government departments work out how best to navigate the issues together. The current enforcement strategies do not work. They serve to incentivise non-compliant offerings and fail to support the compliant parts of the sector. The lack of visible enforcement, the lengthy delays in taking any action, and targeting the workers for recovery all serve the interests of those seeking to circumvent, or flout, the rules.
Coupled with a series of ongoing rule changes such as the off-payroll legislation that extended its reach into the private sector on April 6th 2021, the incentives for abuse have become even greater -- and the issues that have made the headlines recently around holiday pay, skimming, mini umbrellas, and disguised remuneration schemes are the result.
Acting on data
HMRC holds the appropriate information that would make it easy to pinpoint non-compliant schemes and close them down faster.
Real-Time Information (RTI) reporting that was introduced in 2013 along with the 2014 Intermediary Reporting provides HMRC with two sets of data that give a unique insight into the market and the supply chain.
Matching that data should set alarm bells ringing and help HMRC to identify a dubious provider and take the appropriate action. While HMRC has introduced a naming and shaming-style list of tax avoiders, the list still suggests that some schemes listed remain in operation, all the while duping workers into signing up for them.
Earlier this month at Spring Budget 2023, the chancellor outlined his intention to consult on introducing and increasing prison sentences for tax avoiders. This is simply a case of shutting the stable door after the horse has bolted. Reacting to the crime is simply not good enough, especially when HMRC has the data it needs to address and punish the perpetrators of tax avoidance now.
We need joined-up thinking and all the appropriate government departments should seek to develop closer relationships with compliance bodies and the wider sector bodies.
Compliance bodies set their own compliance standards and developing a more structured approach would allow the departments to inform and, as importantly, be informed on pressure points in the market.
The nature of the compliance accreditations allows faster reactions to market distortions and would help limit and restrict market access to the architects of dodgy schemes.
Including the wider sector bodies provides the broadest reach for messaging across the sector and provides a benefit to policymakers to design and then implement an agreed compliance standard that works for all.
My closing message to Margaret Beels...
Transparency is the strongest weapon against non-compliance. A collegiate approach is the best course of action. I hope that Margaret Beels will take steps to build on her 2022/23 interim findings so she can submit a 2023/24 strategy that will work well for all those who work hard to raise standards, and get rid of those who seek to perpetually break the rules, behave unethically and cause untold damage. Action is needed, not more platitudes and lip service.
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