The construction industry in the UK does not have a single, uniform way of engaging individuals – a diversity that may benefit the industry as it weathers a downturn. Any given construction site or project is likely to comprise a mix of:
- Directly employed workers
- Self-employed individuals, either directly or indirectly engaged, often operating under the Construction Industry Scheme (CIS)
- Umbrella company employees
- Workers running their own personal service companies (PSCs)
- Individuals engaged through other intermediaries like staffing agencies
This varied approach grants flexibility to those doing the hiring, especially given construction’s project-based nature. Subcontractors, whether self-employed sole traders or freelancers, are free to move between sites and projects, or chase better rates – contributing to the widespread preference for CIS self-employment in the industry.
However, the choice of employment status is not always simple or straightforward. To properly comply with CIS, contractors must correctly determine the employment status of the subcontractors they hire – a matter of fact based on the working relationship, not personal preference. There are also other legislative factors to consider, like the agency legislation that looks at the degree of supervision, direction, and control over how an individual provides their services.
The result is that construction companies must stay diligent in navigating the complex web of employment status rules and requirements, especially with HMRC’s powers to reclassify workers. This is further complicated by the expansion of the off-payroll working rules from the public to private sector. While some may argue the CIS system is abused, a balanced view is that a small percentage of self-employed workers may have been pushed into arrangements they don’t fully understand.