View all news articles >>

Unfair Competition and the Temporary Labour Market

Article Date: 02/03/2009

The company was set up in 1999 as a groundwork labour supplier. Two years prior to this HM Revenue & Customs took away the exception for construction workers under what is now Chapter 8 of the Income Tax (Earning and Pensions) Act 2003, known as Agency Legislation.

This meant that employment agencies could no longer employ labour only subbies on a self-employed basis. To circumvent this legislation the agencies entered into partnerships with ‘composite companies’, which exploited a loophole in tax legislation, known as IR35 or intermediary legislation, which is now regulated under Chapter 7 ITEPA 2003.

Paradoxically, I personally disagreed with the removal of the exception, and since 2003 have been arguing for its reinstatement with HMRC. At that time, we set up a new type of payment service operating through CW Construction Ltd, which meant that agencies no longer needed to pay all construction workers through composite schemes. When these schemes were outlawed by the amendment Chapter 9 ITEPA 2 2003 in 2007, this cleared the way for genuinely self-employed labour only subcontractors to gain work using an employment agency as an introducer.

Since we first ‘set out our stall’ against composite and agency partnerships, the company appears to have been blacklisted by many of the major employment agencies. In 2008, the Office of Fair Trading did lay down a Statement of Objection against eight recruitment companies for blacklisting and price rigging.

There were three reasons for my company being prevented from applying to Preferred Supplier Lists;

1. We refused to operate ‘composite rules’ and later 'PAYE Umbrella rules'
2. We refused to pay kickbacks to agencies
3. We refused to accept liability for labour only subcontractors under our company Employer’s and Public Liability insurance, because for insurance purposes agency workers are the employees of the contractor with responsibility for the place of work.

The reason for adhering to these refusals were;

1. We knew composite and some PAYE Umbrella practises to be based in tax evasion
2. We would not get involved with illegal practises
3. We knew that agencies that operate is this way, may not undertake checks to ensure that the client company was properly insured

I abhor injustice and bad practise in the construction industry, which is why as a company we joined Constructing Excellence. Bad practise used to be endemic in the construction industry, but following the Egan and Latham reports, in certain sectors it seems to have gone underground.

Evidently, there is still much work for organisations like Constructing Excellence and like minded construction people to do, in order to stamp out once and for all the illegal and dubious practises which go on in the temporary construction labour market.

Carolyn Walsh

Director

View all news articles >>