The IR35 legislation is to ensure that contractors pay the same Tax and National Insurance contributions as equivalent employees. The regulation was changed in April 2021 for private sector contractors to transfer responsibility from contractors to large and medium companies to assess IR35.
To put it simply, the IR35 change was an attempt to crack down on tax evasion and avoidance by paying people as freelancers when they should be paid as staff.
For our industry, lorry drivers have claimed to be freelancers when in fact they were working for just one company: this means they weren’t taxed under PAYE rules or deducted the usual National Insurance contributions, therefore getting a higher take home pay and paying less tax” – said the RHA about the changes back in April.
Now, according to The Grocer, to increase the number of drivers amid the aching driver shortage, Tesco and Co-op are looking for drivers with a limited company to their name.
However, ADR Network, the recruitment agency these supermarket chains use, claims that it has carried out extensive due diligence to ensure it was acting within the rules.
The article goes forward, though. It adds that the recruitment tactic has angered other logistics operators who claim the move will accelerate already soaring wage inflation. Drivers can boost their incomes by around 25% by using a limited company, meaning any employer hiring a driver directly must raise salaries substantially to compete – the article reads.
What’s the main difference between a subcontractor and an employee?
How can it be determined whether a driver works as a subcontractor or as a hidden employee?
Apart from the obvious part that subcontractors pay taxes and National Insurance contribution for themselves, while employees don’t, there are a couple of other features that can help to decide if someone is working under the appropriate scheme.
Someone who works for a business as a subcontractor should be able to choose what hours they work; they quote for contracts; are paid per contract, work for numerous different businesses; make the decisions on the work to be done (how, when, what and where), can hire other people to do all of the work or assist them; provide their own tools and equipment or possibly hire them.
Moreover, one of the most important characteristics of subcontractors is the ability to substitute themselves for another worker.
Recruitment agency, Tesco and Co-op say they are not wrongdoers
The Grocer reached out to all parties to find out what the real reason was for employing drivers as subcontractors.
As we wrote earlier, the ADR Network recruitment agency claims it has carried out extensive due diligence to ensure it was acting within the rules.
A Tesco spokesperson said the company was doing all it can “to manage the current challenges facing the logistics industry and ensure our customers can get the products they need”.
A Co-op spokesperson transferred the responsibility to the recruitment agency, saying the adverts were placed by ADR and not by Co-op, and it expected any HGV drivers engaged via these adverts to be providing services for multiple customers.
Mark Jones, a partner at IBB Law, told The Grocer that if things were things to go wrong, it would be likely that the recruitment agency that would bear consequences.