A social worker engaged by the Home Office has successfully claimed nearly £37,000 from a recruitment agency after an employment tribunal deemed that ‘unlawful deductions’ had been made from their pay.
According to specialist Qdos, the case brings into sharp focus the complexity of employment status – something that the government has promised to simplify under the Employment Rights Bill.
Michelle Appiah, an independent social worker, had previously carried out work for the Home Office outside of the IR35 legislation, meaning she was deemed to be genuinely self-employed. Upon being placed in a new role at the Home Office by Tripod Partners in June 2021, it was deemed by the Home Office that the contract belonged inside IR35 – meaning she was seen to hold an employment relationship with her client.
The new role involved carrying out age assessments for the Home Office on young people arriving in the UK unlawfully, at a reception centre in Kent.
Appiah was given the option to operate via her limited company inside IR35, through an umbrella company or become an agency worker, where employment taxes would be deducted from her pay.
The Home Office had assessed Appiah on the HMRC tool Cest (Check Employment Status for Tax) and then decided she fell under IR35. She thus worked through her limited company inside IR35, with employment tax deductions made by Tripod Partners prior to Appiah receiving her fee.
In addition to income tax and employees’ NI, this included employers’ NI – which Judge Housego deemed unlawful. This is because, by law, people deemed employees should not have employers’ NI deducted from their pay directly. Appiah’s claim against the Home Office was struck out by the judge, but her claim against Tripod Partners was upheld.
The judge ruled: “I decided that the claimant was a worker, that the contract did not authorise deductions from the wages of the claimant, that statute did not require the respondent to deduct the employer’s NI from the wages of the claimant, and that she had not consented in writing to the deductions, so that the respondent should not have deducted employer’s NI from the claimant’s wages.”
Seb Maley, Qdos CEO, commented on the case: “This is a stark reminder of the complexities that plague employment status – exacerbated by the introduction of the off-payroll rules. Nobody is questioning if the worker belonged inside IR35 and therefore should have been subject to PAYE tax. It’s that the tax that was unlawfully deducted from the workers’ pay – leaving them worse off and, ultimately, the recruitment agency with a sizeable bill. This case could also be just the tip of the iceberg. It brings the issue of compliance into sharp focus for businesses engaging and placing flexible workers, not to mention the need for Labour to deliver on their recent pledge to simplify employment status once and for all.”
Rebecca Seeley Harris, of ReLegal Consulting, added: “Finally, justice for a contractor working inside IR35, who’s taxed as an employee but doesn’t receive any of the rights or protections of employment. This judgment could be the catalyst for many more like it, given this is common practice in the industry. If this proves to be the case, it would cause havoc in the labour supply chain, at a time when the government is looking to stimulate growth.”
