Courier firm Hermes may face HMRC investigation over low pay

2016-09-20 chris posted:

Delivery firm Hermes is facing a possible investigation after a government report alleged some of its drivers are paid below the minimum wage.

MP Frank Field published a report following complaints from 78 current and former Hermes couriers. In response, the business minister Margot James has requested that HMRC consider launching a “proactive investigation” into the arrangements used by Hermes, which delivers parcels for John Lewis, Next and other retailers using 10,500 self-employed couriers. Hermes said it would co-operate with an investigation, but said the report "does not reflect" the way it operates.

Mr Field's report, which was sent to Prime Minister Theresa May, said Hermes's practice of employing its drivers as self-employed workers sees many of them "paid an hourly rate that is much lower than the National Living Wage". Several couriers said their monthly earnings after costs were less than £6.80 an hour, 40p an hour below the National Living Wage.

The report also claimed there was "serious bullying from some of the middle-men and women who manage the operation for Hermes and who seem to be enforcing an employee contract under the cover of self-employment". Examples include:

  • Two parents being threatened with loss of work while sat at their dying little boy's bedside;
  • An immediate loss of work for somebody who attended an urgent hospital appointment;
  • A courier who lost their job after their car broke down during a round, and being told by their manager that they should have had a spare car.

Couriers for Hermes are classed as self-employed, and therefore the company is not obliged to pay them the national living wage. The task for HMRC is to establish whether these couriers are correctly classed as self-employed workers, or whether they are actually employees.

The workers claim that they are not genuinely self-employed because they must work to the company’s orders, such as arriving at the depot by a certain time, deliver parcels to certain time slots and told they may lose their round if they cannot work the number of days Hermes requires.

Employment status is a major issue in the UK. The latest official data from the Official of National Statistics shows that 83% of new jobs created in the UK between March and May 2016 were self-employed positions. This means these workers do not benefit from the same employment protections as employees. For example, only employees can claim unfair dismissal, maternity leave and redundancy rights.

Not all people who work for others are considered to be employees. Some fall into the wider category of ‘workers’ who have a different set of employment rights. Some work for others but remain independent contractors. Sometimes, as with agency workers, a worker may have two potential employers and it may not be clear whether they are employed by either one or both of them.

In determining whether an individual has employee status, businesses have to paint a picture. It is not a mechanical exercise of running through items on a checklist, but rather it is a matter of evaluating the overall effect of a worker’s employment and making an informed appreciation of the whole. Things to consider include personal service, control, pay, attendance, benefits like holiday and sick pay, tax arrangements and engagement with other workers in the business such as training and events.

All businesses, irrespective of their size or sector are responsible for paying employees aged over 25 the national living wage. Employers cannot simply opt out by defining their as workers self-employed, even if the worker signs a contract to that effect. Punishment for non-compliance can include fines of up to £20,000 per worker, naming in the national press, and for the worst offences, criminal prosecution.

The result of any HMRC inquiry into the self-employed status of Hermes’ 10,500 contractors are also likely to be closely watched by many firms, especially companies such as Uber and Deliveroo which also heavily rely on self-employed workers. There are also a number of ongoing court cases in which workers have sought to prove that they are effectively working as employees, not freelancers, which could provide to be landmark judgements.

For more information about employment status, contact us today on 01225 632240 or at info@renneyandco.com.

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