While it is likely to be popular among gig workers and their employers, organisations should take care before copying the agreement that has recently been struck between Hermes and the GMB Union.
The agreement, guaranteeing minimum wages and holiday pay for self-employed couriers, could yet unravel if HM Revenue and Customs (HMRC) decides that it tips the balance in favour of employment for tax purposes.
As it stands, the agreement permits some 15,000 couriers employed by Hermes in the UK to opt in to contracts offering them better employment rights, including guaranteed minimum wages and holiday pay, without losing their status as ‘self-employed’.
If employees choose to opt in, however, they must agree to a degree of control. For example, Hermes will define the order that goods must be delivered each day, and the route they are required to follow.
By allowing couriers to opt in or out, Hermes is effectively enabling them to choose between continuing as ‘self-employed’ workers or opting for a new status as ‘self-employed plus’.
The problem is that this arrangement may be regarded as employment for tax purposes, with potentially substantial increases in National Insurance.
HMRC offers a system known as ‘check employment status for tax’ (CEST), which assists in defining employment status for tax purposes. Imposing controls over the route and order of delivery will be unhelpful in securing a self-employed verdict.
The tax position of self-employed workers is a contentious issue, and this agreement could have wider implications than many might think. For example, unless the working practices clearly differentiate between ‘self-employed’ and ‘self-employed plus’ workers, those not accepting the offer of increased rights could also be disadvantaged if HMRC decide that all the firm’s couriers are liable for tax under the PAYE system.
Much remains unclear and, rather than rush to copy this agreement, employers should remain cautious and seek professional advice beforehand.
There are some key questions that should be asked by any organisation wishing to emulate the Hermes agreement. Does the contract clearly indicate a self-employed, business-to-business arrangement? Does the reality of the engagement mirror the contract, and also clearly demonstrate self-employment? Will changes to the contract result in a different verdict on the status of employment or self-employment? Does the imposition of controls make it more likely that the worker will be legally entitled to additional employment rights over and above those being offered?
Andrew Brookes is tax senior manager and employment specialist at accountancy firm Menzies LLP