In 2021, the Freelancer & Contractor Services Association (FCSA) made a significant decision to remove the joint employment model from its Accreditation Codes. This move was driven by FCSA’s unwavering commitment to promoting transparency and fairness within the contracting industry. In this blog post, we will delve into why FCSA chose to take this stand, examining the risks, implications, and the need for change surrounding the joint employment model.
Understanding the Joint Employment Model
The joint employment model is the concept that two or more entities can be considered the employer of a single worker. This often occurs when multiple entities share control over the worker’s employment relationship. While this model may seem advantageous in theory, especially in industries where workers perform tasks for various entities, such as temporary staffing agencies, it presents a myriad of problems in practice.
HMRC’s Perspective
One important perspective to consider is that of HMRC. After discussions with HMRC, it has been confirmed that while the joint employment model is in line with regulations, it is subject to case-by-case evaluation. This uncertainty leaves employers in a precarious position, unsure if their employment structure will withstand HMRC scrutiny. HMRC’s opinion raises concerns about the model’s stability.
The Medical Sector Influence
The medical sector has been a notable proponent of the joint employment model, primarily due to the S702 nurses exemption, which exempts certain medical services from VAT. This exemption provides a commercial incentive for agencies to use the joint employment model. However, it raises questions about whether this model genuinely benefits workers or is primarily motivated by commercial gain.
Complexity and Confusion
One of the primary concerns surrounding the joint employment model is the complexity it introduces into employment relationships. Workers often find it challenging to determine who is responsible for various aspects of their employment. This ambiguity can lead to disputes and legal complications, making it difficult for workers to uphold their employment rights.
Moreover, when joint employment is in effect, employers face potential double liability for employment law violations. This adds a layer of complexity to the transfer of tax debt, putting extra financial pressure on employers, particularly small businesses.
Legal Uncertainty and Risk to the Supply Chain
The joint employment model poses another risk due to its legal ambiguity. Since it hasn’t been thoroughly tested in court, the legal stance on where employment risk truly lies remains undecided. This uncertainty could lead to legal complications in the future, making it a risky choice for companies. Testing the model in court could provide valuable clarity for the industry.
Additionally, the joint employment model introduces an element of risk to the supply chain. FCSA emphasises the importance of transparency and clarity within the contractor, agency, and member relationships. However, the joint employment model introduces too many unknowns, potentially disrupting the supply chain’s stability.
Conclusion
In conclusion, the decision by FCSA to remove support for the joint employment model underscores its commitment to fairness, transparency, and risk mitigation within the contracting industry. The joint employment model, while theoretically beneficial, presents numerous practical challenges, including potential VAT issues, legal ambiguity, and complications within the supply chain.
As HMRC continues to evaluate this model on a case-by-case basis and the legal landscape remains uncertain, there is a risk that the joint employment model may not be in the best interest of workers or employers. Therefore, it is crucial for the industry to reevaluate its use and seek alternative employment structures that provide clarity, fairness, and protection for all parties involved. In an ever-evolving landscape, staying informed about current laws and regulations is paramount to ensuring equitable treatment for all stakeholders within the contracting industry.
