The contracting sector had pretty much accepted that contractors would never again qualify for employment rights following the guidance laid down by the James v Greenwich ruling. So this made last week’s Employment Tribunal ruling in favour of granting a contractor employment rights, and therefore the right to appeal against unfair dismissal, all the more surprising.
What will be less surprising is the impact. Clients will reach for their lawyers to beef-up contracts and agencies will be expected to check their contractor rosters to weed out any contractors at risk of being able to claim employment rights. Contract schedules will have to be very carefully worded to ensure every contractor role is completely project-based, so that none of the tests of employment could be remotely satisfied.
And permtractors – workers who’ve been at the client so long they’ve got their eye on a retirement carriage clock and do exactly the same job as the permanent employee they sit next to – will have to ask themselves: am I a contractor or an employee?
There is an element of natural justice about this ruling, in that the original proposals for IR35 suggested that contractors who were disguised employees, and therefore being taxed like employees, should enjoy the same rights as employees. That never formally came to pass, but it is possible that Alstom v Tilson has just changed all that.
However, most clients out there want to hire contractors, not disguised employees. They want contractors because contractors provide flexible access to skills their organisation does not have, or does not need on a long-term basis.
Yes, some projects might take longer than originally thought, so some contractors might have their contracts renewed and stay around a bit longer. But clients shouldn’t expect to arrive at work one morning and find they’ve taken on a new employee by stealth. And contractors shouldn’t expect to have the best of all possible worlds – the higher pay that comes with contracting combined with the employment rights that come with being a permanent employee – at their clients’ expense.
Genuine contractors should have nothing to fear from this ruling, except that clients will become even more paranoid about arms-length relationships, which could be good for agencies, and working arrangements that clearly demonstrate the contractor is not an employee, which is good for keeping contractors outside of IR35.
Let the permtractors chase their employment rights, and let’s all sit back and watch as HMRC tots up how much they owe in back taxes. And then let workers who chose to be contractors without employment rights pursue their careers free from harassment from HMRC and the fear of IR35.