In the summer of 2018 a number of Hermes couriers won the right to be categorised as workers at an employment tribunal. In a move which avoids further litigation, Hermes has agreed with the GMB union to offer better rights to couriers who did not participate in the tribunal case. These rights include guaranteed minimum wages and paid holidays, but fall short of full worker status rights.
Couriers can opt in to the new ‘self-employed plus’ arrangement and receive pay rates at least equal to the national minimum wage, along with up to 28 days paid holiday.
Whilst this seems good and reasonable from a workers’ rights point of view, what impact does it have on the tax status of the couriers?
Currently there are two very different employment status frameworks for tax and employment rights. The Government’s Good Work Plan, containing proposals for implementing many of the recommendations of the Taylor Review of Modern Working Practices, was published in December 2018 and contains a number of proposals including one to legislate the tests for determining employment status. More specifically it suggests a greater emphasis on the ‘control’ test rather than on rights and benefits.
By opting in to ’self-employed plus’ the courier will need to follow delivery routes specified by Hermes, which argues that this will be necessary to ensure couriers take the most efficient routes in exchange for the guaranteed pay rates. This alone is a very strong indicator of control over how the worker performs the work. Even without the proposed specific legislation, control and supervision over workers is often sufficient, when combined with availability of some of the rights and benefits associated with employment, to tip the balance in favour of employed status for tax purposes.
Until the employment law and employment tax frameworks are fully aligned we may not have a definitive answer and each case will be decided on its own merits. Both Hermes and the GMB are very bullish in their view that the new arrangement will still constitute self-employment. However, with such a disparity between the amount of National Insurance Contributions payable by the employed and self-employed it is difficult to see why HMRC would not seek to challenge the treatment for tax purposes.
With so much at stake, other companies should ensure that they take proper advice on whether such an arrangement can justify self-employed status both under current practice and future legislation and keep a wary eye on future developments.