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Self-Employed People Not Allowed on Public Sector Construction Projects

The Construction Leadership Council (CLC) has developed plans for the construction sector to stop engaging self-employed people in public sector projects by 2024, instead they are calling for direct employment.  This would be a very big change given that there were approximately 811,000 self-employed construction workers at the end of 2020, which is estimated to be almost 50% of all construction workers.

The goal of the proposed policy is that by the end of 2024 direct employment will be required throughout supply chains through pre-qualification questionnaires and tender criteria for public sector contracts.  According to the Construction Leadership Council, the plan “provides an actionable, measurable blueprint for recruiting the right talent, training them to have the right skills, and ensuring that the sector as a whole is supported to develop and maintain the highest levels of competence.”

So the rationale is certainly laudable; to encourage recruiting the right talent, skills development and competence within the construction workforce.  But, the plans will result in significant additional costs for construction firms, not only the investment in upskilling the workforce but also the costs of employment overheads.  Given that employers NICs are currently 13.8% it is unclear whether firms will be able to afford such a large hike in expenditure, plus there will be on-costs and associated risks of having a bigger workforce to manage: relocating them for projects, potential redundancies if new projects don’t come in etc.  Cumulatively, the change could mean less flexibility as well as a much higher cost than the current self-employed workforce.

Furthermore, the plan could be flawed if it hasn’t properly considered sentiment among construction workers themselves, who traditionally prefer self-employment and have resisted previous policy changes intended to encourage direct employment within the sector.  It is also unclear whether consideration has been given to the fact that most self-employed professionals undertake their own upskilling rather than risk their competence becoming outdated, and therefore it remains to be seen whether direct employment combined with training and development opportunities will be an attractive option.

Some questions we might ask ourselves are:

  1. Will construction workers really want to be directly employed?
  2. Will main construction contractors really be able to offer employment to it’s workers given that, by definition, construction is a project based industry?
  3. Will pay rates increase so that directly employed construction workers don’t receive a reduction in take-home pay?
  4. Will projects be able to be delivered if workers refuse employment?

It is a familiar tale, reminiscent of the impact and difficulties caused by the off-payroll legislation that will be effective in just 3 weeks.

Time will tell as to how this new construction sector policy will pan out.  In any case, set within the context of needing to attract a further 210,000+ construction workers into the sector between 2021-25 (to deliver the many projects already in the pipeline), the plan will certainly be challenging to achieve.

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