Saturday, 11 February 2017

The "Gig" Economy

About 18 years ago, I was working as a self-employed I.T. Contractor, writing Interactive Voice Applications for large institutions. I wrote the Telephone Banking Application for HSBC. When I say I wrote it, I made it work. I picked it up with a few weeks to the deadline for it to be working and HSBC desperate for it to work properly.  I managed it and made the application work.

As a self-employed contractor, I received no benefits from the client. But I did work at their premises and for the duration of the contract I was contracted to work for them exclusively. Independent contractors at the time were earning huge payments and working more efficiently than the large I.T. programming business. The clients also liked that independents were cheaper than the big boys and usually worked smarter. After all, you can't make a living on your own if you're a poor programmer (nearly all of my contracts were from word of mouth recommendations), but it's easy to be a bad programmer if you're working as an employee of a large company supplying I.T. services.

But the thing is, the payment we received, was paid to our own company. We decided on how much was taken as salary, how much was left in the bank account to cover the lean times, how much expenses we paid ourselves and what we bought for the company (claimable against VAT) and importantly how much we paid ourselves in dividends, at the corporate tax level of 20% at the time. You see, the government didn't like us, because we were smart and didn't give half of it away to them in tax.

Then when Labour came into power, under the influence of large I.T. service companies, a new tax code called IR35 was brought in that stated if you worked the same as an employee of a company even if you were self employed, then the company was liable to pay employers national insurance amongst other things and the contractor's payment was classed as a salary and taxed at that rate. The contract market tried to evolve after that, but it became harder to work as an independent on the client's premises and the big companies started to take over the market.

Fast forward 16 years and we come to the so-called "Gig" economy where individual self-employed contractors are employed on an exclusive basis by a firm to provide services. Sounds familiar. It seems IR35 has been forgotten, because one of the hardest things to get round was the exclusivity clause in it. We had to write the right of substitution into our contracts, so that we had the option of providing another contractor in our place if ever we couldn't show up. In essence, working like a larger business rather than a one man band. A risky strategy, but one that got round the exclusivity clause. Not so risky if you could team up with another contractor, like I did.

So the likes of Uber and other firms requiring the exclusive attention of a self-employed contractor fall foul of IR35 and I've been waiting for the Government to catch up and start to impose an already existing law onto companies using this model. Uber fell first, then a cycle courier won her case and now a plumber has also won his right to be classed as an employee. You see as the government said way back in the 90's you can't have your cake and eat it: if it walks like an employee, wears the uniform like an employee and is subject to rules like an employee, then it's an employee. With all the rights an employee gets. In the 90's we were earning huge sums, but this time contractors are lucky to reach minimum wage apparently. So the big firm, in not paying properly is falling foul of that law as well.

About time too. IR35 killed the independent contractor market thanks to big businesses. It looks like this time it's big businesses that are suffering.

Payback's a bitch.

It's just a shame it's not I.T. companies suffering.

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