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Hermes among firms flouting national living wage

Firms are exploiting a loophole in the law that enables them to pay people less than the national living wage

Working practices at the Hermes courier company reveal how firms are exploiting a loophole in the law that enables them to pay people less than the national living wage.

Workers classified as agency staff or self-employed who are taken on as freelancers to cover what would otherwise be a full-time position are also denied benefits such as sick pay, holiday allowances, maternity leave and pensions.

Gig economies such as couriers for online shoppers and app-driven services such as Uber, which only offer only temporary positions and short-term engagements, are being investigated by HM Revenue & Customs (HMRC) following complaints from staff at Hermes, who maintain they should be treated as full-time employees rather than being self-employed.

Hermes issued a statement saying it was confident in the legality of its self-employed courier model, but other companies are waiting to see whether they must review their recruitment procedures depending on the outcome of a tribunal between two drivers and the Uber transport company.

Uber offers its drivers the flexibility to decide when and how much they work; however, the two drivers who have initiated the action maintain their employment is controlled and restricted, as they only know their destination when they pick someone up and cannot send another driver in their place.

The crackdown is intended to flush out firms that employ dubious tactics to get around the need to pay national insurance contributions and other taxes and that make it easier for them to dismiss staff.

The Treasury says it is owed more than £300m in lost national insurance contributions and any organisation found to be in breach of existing laws by HMRC could be fined up to 100 per cent of any outstanding tax.

Edward Troup, executive chairman of HMRC, said he will take all necessary steps to tackle false unscrupulous practices and that employment rights of workers cannot be ignored simply by labelling individuals as self-employed.

Other cases are waiting to be brought before the tribunal. Workers at CitySprint are due to have their case heard at the end of November, while Excel, Addison Lee and eCourier face similar action early next year. Sports Direct recently had to pay its workers £1m in back pay after it emerged they had not received the national minimum wage.

The employment status of workers is a contentious issue. Research shows nine out of ten new jobs are being filled by freelance and agency staff, according to Alexandra Mizzi at Howard Kennedy solicitors.

Amid concerns that companies are increasingly using agency staff, whereby workers have fewer employment rights, Matthew Taylor, former head of Tony Blair’s policy unit, has been chosen by the government to head a review into these practices.

Upon taking office, Prime Minister Teresa May spoke about the need to review the pay, security and employment rights of ordinary working people. These investigations by HMRC and the work being undertaken by Taylor are the first steps in fulfilling this promise.

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