Tuesday, November 15, 2016

The 7 million precariat

The number of workers in the UK in precarious positions where they could lose their jobs at short or no notice has grown by almost 2 million in the past decade to more than 7 million (one in five workers). Half of the biggest group – the self-employed – are in low pay and take home less than two-thirds of the median earnings. Two million self-employed people now earn below £8 per hour.

“The rise in self-employment has been hailed as part of the economy’s success story in the recovery, but for thousands of people it can mask some worrying trends – namely being forced into precarious, low-paid work,” said Ashwin Kumar, chief economist at the Joseph Rowntree Foundation. He pointed out that self-employed families were more likely to live in poverty, with a median income of £209 a week against £384 for employees. 

Businesses insist on using more self-employed workers and increasingly recruit staff on temporary and zero-hours contracts. The attractions of flexible or insecure contracts are considerable to employers and they dispute many of the downsides that unions, workers and analysts have highlighted. A review of studies around the world published in the BMC Public Health journal concluded that job insecurity posed a comparable threat to health as unemployment – and that anticipating a job loss could actually have a more significant effect than experiencing it.

750,000 more people are on zero-hours contracts than in 2006, and 207,000 more people are working as temps. Companies such as Argos and Tesco use thousands of agency temps. Tesco, Britain’s biggest supermarket chain, said between 35% and 40% of its warehouse workers – some 6,000 – are provided by agencies. Sainsbury is now using 54 different employment agencies for its temporary warehouse workers. Sainsbury has a contract with De Poel, an agency services provider, which in turn manages contracts with employment agencies, which then hire staff. The taxi company Uber and courier firms Hermes and Yodel are among firms relying on 4.7 million “self-employed” workers. Amazon relies on thousands of self-employed workers to deliver its parcels and subcontracts to companies such as Hermes and Yodel, which subcontract to thousands more couriers themselves.

Self-employed workers typically earn about half the wage of permanent employees, zero-hours contractors about 40% and temp workers around two-thirds.

A tax avoidance scheme used by temp recruitment agencies is depriving the Treasury of “hundreds of millions” of pounds a year, a Guardian investigation has found. 

 By using “contrived” financial arrangements employer’s can cut their national insurance bills. Schemes also generate millions more pounds for participants by exploiting VAT rules that were originally designed to benefit very small businesses.

Workers’ contracts are being transferred from a single employment agency into a web of thousands of tiny companies that benefit from the tax breaks. Each of the tiny employment companies are ostensibly run by overseas directors, who are based in locations such as the Philippines and Pakistan. Because each mini employment company created in these schemes employs only two or three workers, the taxes it has to pay on its wage bill are small. That small tax bill can be effectively eradicated by each mini company claiming a £3,000 government subsidy called the employment allowance, which can only be claimed once by a company and was designed to help very small businesses create more jobs or increase wages. The mini employment companies can also generate an additional windfall by charging VAT at 20% but paying it back to the government at about 12%, exploiting arrangements designed to free very small businesses with revenues of less than £150,000 a year from red tape.

Some agencies are keeping these schemes secret from the organisations they are supplying the workers to.

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