Over recent months much has been written about the ‘gig’ economy, describing its rise, its popularity for both workers and consumers, and discussing how ‘workers’ in the gig economy should operate.

Should the worker be classed as an employee or be ‘self-employed’. A direct challenge to Uber by 2 workers (out of 40,000 in the UK), culminating in the decision handed down by a tribunal which described the Uber drivers as ‘workers’. Many will be thinking that we are all workers, so what is the difference. Well, in UK law there has always been this third category. We have employees who are workers who get their income taxed at source. We have self-employed people who are workers who account for their own tax, then we have ‘workers’. This third category account for their own tax, but have ‘employee’ rights to holiday pay and the national minimum wage (NMW).

Many commentaries have focused on how much this may cost Uber, who are appealing against the decision. If the decision is confirmed after appeal, Uber may have to ensure that their drivers are given holiday pay and are paid at least the NMW. These workers will still have to account for their own taxes.

The rise in the number of people who have the responsibility to account for their own tax, be they self-employed or a worker, is causing some concern within HMRC. They are worried that many will not be aware of their obligations. They are confident of the collection of tax from employees, but self-employed and workers, who are growing in numbers, are a different matter. Hence the plethora of legislation over the last 10 to 15 years that has affected both the Recruitment and contractor/freelancer/self-employed sector.

However, they are less concerned when a worker operates through an umbrella company.

The umbrella company is the employer of record for this worker. The worker enjoys all the normal employee rights, as well as taking advantage of the buying power of a large company with employee rewards, Bupa cover, and accident insurance etc. The umbrella company allows a worker to move from one assignment to another but still be classed as an employee. HMRC is also happy as the correct amount of taxes is collected and paid over to HMRC by the umbrella company. Finally end clients and recruitment companies are relieved as there is no risk that HMRC may come knocking, saying that workers are their ‘employees’ and demanding normal employment tax, plus interest and penalties. The umbrella company is an ideal solution for ‘workers’, HMRC, recruitment companies and end clients. Well done umbrellas!

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