After a tribunal determined that unlawful deductions had been made, a social worker employed by the Home Office was able to claim nearly PS37,000 back from a recruitment company.
The case, according to Qdos specialist, brings to light the complexity of employment status. This is something the government promised to simplify with the Employment Rights Bill.
Michelle Appiah was a social worker who had worked for the Home Office in the past, but outside the IR35 law. She was therefore deemed as a genuine self-employed. Tripod Partners placed Michelle Appiah in a new position at the Home Office in June 2021. The Home Office deemed that her contract was within IR35, meaning she had an employment relationship with the client.
In a Kent reception centre, the new role involved assessing the age of young people who had illegally entered the UK.
Appiah had the choice of operating via her limited company within IR35 or through an umbrella company, or becoming an agency worker where employment taxes were deducted from her salary.
Appiah was assessed by the Home Office using HMRC’s CEST (Check Employment Status for tax) tool and determined to be in IR35. Appiah worked for her limited company within IR35. Employment tax deductions were made by Tripod Partners before Appiah received her fee.
Judge Housego found that employers’ NI was illegal, in addition to income taxes and employees’ NI. The law states that employers’ NI should not be deducted directly from the pay of people who are deemed employees. Appiah’s claim against Home Office was dismissed by the judge. However, her claim against Tripod Partners has been upheld.
The judge ruled that: “I determined that the claimant is a worker and that the contract does not allow deductions from her wages, that the statute does not require that the respondent deduct employer’s National Insurance from her wages, and that there was no written consent to the deductions. Therefore, the respondent shouldn’t have deducted employer NI from claimant’s wage.”
Seb Maley commented on the case. “This is an eloquent reminder of the complexity that plagues employment status, exacerbated by introduction of off-payroll regulations. No one is asking if this worker was in IR35, and should therefore have been subjected to PAYE. The tax was illegally deducted, leaving the workers worse off, and the recruitment agency with an expensive bill. This could be the tip of the Iceberg. This case brings compliance to the forefront for employers who engage and place flexible workers. Not to mention, the need for Labour’s recent promise to simplify employment status.
Rebecca Seeley Harris of ReLegal Consulting added: “Finally justice for a contract worker working within IR35 who is taxed like an employee, but does not receive any of rights or protections that come with employment. This ruling could set the stage for more similar ones, as this practice is widespread in the industry. This would be a disaster for the labour supply chain at a time the government wants to boost growth.
