A Freedom of Information (FoI) request by Unite, the UK’s construction union, has revealed that 1,206 million construction workers were paid via the Construction Industry Scheme (CIS) during 2022/23. This was a 15 per cent increase on the figure for 2021/21 when 1,047 million workers were paid via the scheme, a 7.5 per cent increase on the previous year.
Self employment tax scheme
CIS is a standalone self-employed taxation scheme, unique to the construction industry, unlike other forms of self-employment, workers are taxed at source. The big advantage for employers is that as workers are officially self-employed, they are not required to pay employers’ national insurance contributions of 13.8 per cent.
A very large percentage of the workers operating under CIS are bogusly self-employed, which means that they should in reality be directly employed. These workers are denied basic employment rights, meaning that they can be fired at a moment’s notice and do not receive holiday or sick pay.
Case law denotes that employment status is not a matter of choice, it is decided by the true relationship between the worker and the employer. Despite this, employers are increasingly ignoring the rules and making employment status a choice for workers, with higher rates of pay for the self-employed.
Bad news for workers
Unite general secretary Sharon Graham said: “The huge growth in CIS working is bad news for workers. Increasing numbers are operating via a bogus self-employment relationship, resulting in them being stripped of their rights and can be sacked without warning. Meanwhile, employers are laughing all the way to the bank, they don’t have to pay national insurance contributions, nor holiday and sick pay to workers.”
The very high levels of self-employment and bogus self-employment in the industry affects safety, training and productivity across the sector, as a direct result of constantly engaging and then dismissing workers once a particular job has been completed.
The 22.5 per cent increase in CIS workers in two years, raises serious questions about whether the HMRC is appealing and enforcing its rules on who can and can’t be paid via CIS. The loss to the Treasury through bogus self-employment is likely to run into several billion pounds.
Alarming figures
Unite national officer Jerry Swain said: “These figures are alarming, the increase in CIS workers is not reflective of any increase in employment in the industry. Employment status is not a matter of choice and employers should not be offering workers incentives to be self-employed, when they are really employees. The question needs to be asked – what is HMRC is doing, if anything, to tackle this problem?”
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