It was hard to miss the news last week that Pimlico Plumbers lost their case in the High Court against former employee Gary Smith.
Smith argued that despite being VAT registered and paying self-employment income tax, he was for all intents and purposes employed by Pimlico Plumbers and entitled to sick and holiday pay – and the court agreed with him.
HMRC issued its IR35 legislation some time ago to determine the true nature of employment, regardless of how it is structured on paper, to make sure that a contractor and businesses cannot arrange their dealings to artificially reduce their income tax and national insurance bills.
But this case is the most high profile one in which a worker has bought a case against his employer to achieve more employment rights, despite being on a contract basis. They were very specific circumstances, and the decision won’t necessarily impact of other similar contracts, but it is certainly a very prominent decision when pressure is growing for change in the so called ‘gig’ economy.
What does this mean going forward? Well, no doubt Pimlico Plumbers will challenge the decision but until they are able to overturn it – with no guarantee that they will – two distinct groups of people could to lose out.
The workers who want the flexibility of being a self-employed contractor may now find it harder and harder to find the type of contracts they want. If employers are unable to realise the benefit of these types of contracts then there is very little point in them offering them, and may instead opt for a more permanent team of workers if they have to offer employment rights anyway.
On the flip side, if contractors are unable to achieve the flexibility they want then then they may as well go into full time employment meaning the talent pool available to businesses requiring workers on a genuine contract basis will not be as wide as it once was.
The people who will benefit are the workers who have been forced into a contract basis of employment, when in fact they are for all intents and purposes employees, which is basically what the case in question found in favour for.
Only time will tell how the repercussions of the case will ripple out to other businesses using contractors, but its clear the courts will no longer allow what its deems to be ‘bogus self-employment’.