The decision by HM Revenue and Customs to further investigate Hermes couriers’ complaints about their employment status coincides with clear signals that Theresa May’s government would like to be seen as being on the side of Britain’s fast-growing, precariously employed workforce.
The tax authority has passed complaints and allegations to its compliance teams from 98 couriers working for Hermes, which delivers parcels for John Lewis and Next, following the Guardian’s investigation in July that found several were earning below the minimum wage and felt they were effectively employees.
Frank Field MP took up the cause and demanded action from Theresa May in her first weeks as prime minister. She in turn passed a dossier on Hermes couriers to her business minister, Margot James, who asked the HMRC to investigate.
Letters to Field released on Thursday from Edward Troup, the executive chairman of HMRC, and Jane Ellison, financial secretary to the Treasury, indicate a concerted effort – emanating from Downing Street – to deal with any companies found to be abusing the concept of self-employment.
Troup warned: “If we find that companies have misclassified individuals as self-employed, we will take all necessary steps to make sure they pay the appropriate tax, national insurance contributions, interest and penalties.”
Ellison threatened “strong action” when companies “force staff down routes [that] deny them the employment rights and benefits they are entitled to” in order to reduce costs.
If workers are self-employed then companies don’t have to pay employer national insurance contributions, which saves 13% on the payroll bill at a stroke. Neither are they obliged to offer any sick pay, paid holiday or pensions.
May has also appointed a former adviser to Tony Blair, Matthew Taylor, to “consider how employment practices need to change in order to keep pace with modern business models” indicating that regulatory change to how self-employment is defined may be coming.
Hermes, for its part, insists it has done nothing wrong. It says that it pays its couriers above the national living wage and that the HMRC examined its use of self-employed contractors in 2011 and found there to be no problem. It has said it will cooperate with any HMRC investigation.
Ministers are speaking in chorus about their desire to help the low-paid at the moment. In a speech on Tuesday, James said that workers who are not being paid the minimum wage “need to feel they can speak up – I want them to speak up … The person who may not be able to make ends meet already, who struggles to feed their family and heat their home, should not be ripped off by their boss.”
That echoed May’s first speech in Downing Street in which she said she would be guided by the interests of people who “have a job but you don’t always have job security”.
But Labour is sceptical. Clive Lewis, the shadow business secretary, said: “Theresa May and the government have made statements about wanting to be the party of the worker. If they are now not just using the same language as us but putting their words into practice we will applaud them all the way. But so far there has been little to see and it is rhetoric at the moment.”
Torsten Bell, director of Resolution, a thinktank specialising in employment issues, said there had been “a marked and welcome shift in government thinking in recognising that tackling precarious employment is a key living standards issue.
“Supporting those workers who are just managing has risen up the political agenda, underpinning a wish to both update the law to keep up with our changing workforce and crucially to enforce it with a harder line on prosecutions,” he said. “Whatever the result of the specific HMRC investigation into Hermes, the fact that a national debate is under way on the changing world of work can only be a good thing.”
Other companies in the gig economy will be watching what happens closely not just in the Hermes case but also in the employment tribunal case brought by Uber drivers who want to be classed as workers rather than self-employed.
“Organisations of all sizes can expect to have their employment practices scrutinised if they appear, even inadvertently, to be unfairly passing business costs and risk on to their staff,” said Paul McFarlane, employment law partner at Weightmans, a company of solicitors.
“If an organisation miscategorises someone as self-employed, when in reality they are a worker or employee, it could face significant tax liabilities, penalties – including possible criminal sanctions – for failing to comply with auto-enrolment obligations and a wide range of employment tribunal claims including claims for unpaid holiday pay and minimum wage.”
