Contractors must cut reliance on self-employed workers, Whitehall says

Posted on 05 February 2021

​The government is considering how it can encourage contractors to increase direct employment and cut reliance on self-employed workers.

Department for Business, Energy and Industrial Strategy deputy director of construction Fergus Harradence said the government will draw on past experience to promote more direct employment. “We are currently looking at how we can use some of the mechanisms that are under our control to encourage higher levels of direct employment in relation to the delivery of government projects, building on successful examples of things like the Olympic Development Authority,” he said.

“I would say that this is going to be one of our objectives over the next few years; we will want to see more people directly employed,” he added.

More direct employment would see skills improve, Harradence claimed. “Our general position is that we support direct employment within the industry for exactly that reason. There is a correlation between direct employment and greater investment in skills and also in greater investment and more successful management of things like health, safety and wellbeing of the workforce, because firms tend to regard their people as an asset rather than just people that they have employed to do a job,” he said.

He was speaking at a Westminster Business Forum online conference on Wednesday, which focused on the future of the industry. He acknowledged that current business models created barriers to achieving more direct employment and any change will take some time. For that reason, increasing direct employment was not included as a major feature in the Construction Playbook– procurement guidance for the civil service partially aimed at shaping behaviours in the industry – which was published in December.

“This [drive towards direct employment] is quite difficult to do in the context of this industry and I think it is going to take time until firms have the confidence to recruit and employ more people directly,” he said. Contractors need to have more confidence in the pipeline of work, robust order books and be confident in the strength of the wider economy if they are to increase direct employment, he added.

Tax changes, known as IR35, set to come into force in April, are expected to make self-employment less attractive in the construction industry. Last year, ahead of the previously scheduled introduction of the policy, before it was delayed for a year due to the COVID-19 crisis, ECA director of legal and business Rob Driscoll told Construction News that IR35 would lead to the use of more direct employment. “The industry as a whole should welcome the fact that this could shift the model towards more direct employment, which in the face of an exacerbated skills crisis, should be considered as a good thing,” he said at the time.

Harradence also talked up the goals of the Construction Playbook, particularly the aim of moving from procuring on up-front price to whole-life value. He called on firms to bid for new public sector jobs at “realistic” costs, and show the value they can bring through creating social value and cutting carbon. Doing so will create a better industry, he said.

“[We want to] move away from an industry that’s focused on short-term cashflow management, which under-invests in innovation and skills, to a sector that is more financially resilient and sustainable, driven by investment, improving its productivity and performance, and one that is capable of more consistently delivering high-quality outputs for its clients,” he added.

Share this article