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Balfour Beatty and Broken Umbrellas

Construction Workers Wages Rise Following Brexit Referendum
Written by Amy

Text written by Bradley Post, Managing Director at RIFT Tax Refunds 

Under a deal struck with Unite, construction giant Balfour Beatty has announced a ban on payroll companies throughout its supply chain in the North West. Unite is seeing this as a genuine breakthrough in its campaign against exploitation in umbrella company set-ups. With deals like this, some workers can find themselves trapped in a grey area between employment and self-employment, gaining the full benefits of neither. They can also end up footing the bill for both employer and employee National Insurance contributions, with add-on fees that intermediaries aren’t always up-front about.

The Balfour Beatty ban is a strong statement, and there’s legitimate weight behind the blow it strikes. The company handles the Area 10 highways contract, dealing with major roadways across Greater Manchester, Merseyside, Lancashire and Cheshire. While it’s a firm ban, people already employed aren’t being overlooked. Anyone affected who’s been working under an umbrella company deal for 3 months or more will be permanently employed by Balfour Beatty. Looking further ahead, Unite is pressing for the ban to stay in place when the Area 10 contract is rebid in 2019, regardless of who lands it. The union will also be working to extend the new rules to other similar contracts.

Big changes to the rules around employment intermediaries were made by HMRC in 2016. Before this, construction firms who put people to work through umbrella companies got some protection against employment status challenges. The new rules were aimed at tightening up so-called “false self-employment” loopholes, which HMRC believed were costing the Treasury about £2 billion a year.

The guidance that was offered saw employers taking a much closer look at the people they were putting to work. Employment intermediaries like umbrella companies needed to prove that no one had the right to supervise, direct or control how individuals were carrying out the work. In turn, that placed pressure on the end employers, in that failing to provide accurate information about this would shift the liability to them. At the same time, anti-avoidance measures could come into play if HMRC suspected that businesses were trying to find a way around the legislation.

These weren’t just idle threats, either. HMRC had the bank accounts of a large umbrella company frozen during one investigation. As a result, none of the workers got their money and the end client had to find the cash to pay them all directly. All told, employing people through umbrella companies has become much riskier and less attractive in recent years – and that’s the backdrop against which the current Balfour Beatty situation is playing out.

It’s great to see Balfour Beatty working with Unite to ensure that all its workers are employed and paid correctly. Seeing one of the country’s largest construction companies take direct responsibility for the protection and well-being of its workers is inspiring, and should help stamp out exploitation. Here at RIFT, we often help customers struggling to understand their employment status and what it means for their pay and tax. There’s still work to be done, and we’re working closely with HMRC and the construction industry to help improve understanding of employment status rules among employers as well.

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Amy

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