Are Hermes' self-employed plus contracts risky?

Are Hermes' self-employed plus contracts risky?

Delivery giant Hermes announced its new self-employed plus contracts yesterday that will allow workers up to 28 days paid leave amongst other benefits.

This move has been criticised by employment status authorities IPSE however, with the organisation claiming that it will muddy the waters rather than help drivers.

What is the 'new' self-employed plus status?

Hermes is touting self-employed plus contracts as a halfway house between being self-employed and employed, offering the best of both worlds to its couriers.

This new employment status option comes off the back of a deal struck with the GMB union. As well as paid holiday, 15,000 drivers have been offered guaranteed wage rates of at least £8.50 an hour – more than minimum wage, which rises to £8.21 in April – and union representation if they sign up to this new contract.

However, there have been concerns raised as to if Hermes is just avoiding giving its workers full employee benefits. Some employment status experts are even warning that it could be damaging for drivers that accept this offer in years to come.

Should Hermes drivers be wary of self-employed plus contracts?

While the middling solution to employment status is idyllic, it may be a perfect example of 'too good to be true'.

HMRC is known for its black and white approach to taxes; the concept of an employment spectrum is simply unfeasible. The taxman has been criticised in the media, in parliament and in last year's House of Lords report for having no discrimination or compassion when correcting tax avoidance – they see only compliance and non-compliance.

It's this uncompromising attitude that could spell trouble for Hermes drivers that swap to the new contract.

Those that work for the delivery company are currently classed as self-employed, therefore should be free to work the hours they choose and make deliveries in whatever order they think best. However, Hermes is tightening control on the above as part of the new contract.

Should the new paid leave and guaranteed wage terms be accepted, the drivers would also be agreeing to Hermes dictating their delivery routes. The company stated that 'if it is guaranteeing hourly rates of pay, it needs to ensure that couriers are taking the most efficient route.'

The GMB said that the collective bargaining agreement is on an opt-in basis and 'will not affect those couriers who wish to retain their current form of self-employed status and earn premium rates.'

What could the tax implications be for self-employed plus drivers?

Martijn de Lange, chief executive of Hermes UK, stated that '[they] have listened to [their] couriers and are wholeheartedly committed to offering innovative ways of working to meet peoples' differing needs.'

However, there has been speculation that Hermes may just be avoiding straight employment contracts for their drivers to save on employer tax contributions.

The BBC conceded to coercing freelancers and contractors into entering so-called 'disguised remuneration schemes' for the same motivations in a PAC meeting last week. The effects are now being felt by hundreds of BBC workers, despite the off-payroll schemes being 'recommended' by the national broadcaster.

IPSE Director of Policy Simon McVicker argues that Hermes drivers shouldn't even be classed as self-employed in the first place.

Mr. McVicker commented: 'It has to be said clearly: we do not believe Hermes drivers are or have ever been self-employed, so in no way is this a 'new deal' for the self-employed.'

'The line between employment and self-employment is blurred, and the debate extremely complex, but we have considered the Hermes example very carefully and come to the conclusion that their couriers are not self-employed.'

'By creating 'self-employed plus' status, Hermes is muddying the waters of employment status even further. Of course, it is imperative to protect people with an uncertain working status, but this is not the way to do it. It should not be up to multinationals like Hermes to create new statuses and effectively decide UK employment law.'

'Instead of creating this new and unnecessary status, Hermes should simply give their drivers the full package of benefits they are entitled to.'

Uber, another gig economy employer that's ran similarly to Hermes in many respects, recently lost an appeal back in December that ruled that two of its drivers were entitled to employee benefits. The court concluded that James Farrar and Yaseen Aslam should indeed be classed as employees of the ride-sharing service – Uber plans to appeal the ruling further in the Supreme Court.

Expert opinions

Matthew Taylor, author of the 'Good Work' review of modern working practices, spoke out against the contract on BBC Radio 4 yesterday.

He said: 'I'm afraid that HMRC will be looking at this very closely because if somebody has most of the benefits of being an employee and if the employer has most of the benefits of employing somebody, then the tax authorities will want the employee to be paying national insurance as an employee and they'll want the company, in particular, to be paying national insurance on those people.'

Hermes later responded to Mr. Taylor’s comments with surprise, saying that they '100% disagreed'. The company also asserted that it had taken legal advice before drawing the contracts up.

Andy Vessey, Head of Tax here at Larsen Howie and HMRC veteran, shared many of Mr. Taylor’s views, however. He commented:
'It’ll be interesting to see how Hermes thinks it’ll preserve its driver’s self-employed status under the self-employed plus contract. HMRC only recognises two employment statuses, and they are self-employed and employed. The taxman will most definitely take an interest in how Hermes plans to maintain aspects of both in one contract.'

'As far as the new contract goes, drivers will be given certain employee benefits, will be controlled in how they carry out their work and their ability to substitute themselves will be tenuously written in at best. That, to me, would classify 'self-employment plus' couriers as Hermes employees. I wonder, will Hermes defend these workers in court should there be problems down the line?'

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