UK government aims to reduce reliance on self-employed workers in construction industry through promotion of direct employment

Posted on 05 February 2021

The construction industry is a vital part of the UK economy, providing jobs, infrastructure, and buildings that support the country's growth and development. However, the industry has been heavily reliant on self-employed workers, which presents challenges in terms of safety, skills development, and investment in human capital. Therefore, the government has been exploring ways to promote direct employment among contractors and reduce reliance on self-employed workers.

Fergus Harradence, the Deputy Director of Construction at the Department for Business, Energy and Industrial Strategy, spoke about the government's efforts to increase direct employment in the construction industry. According to Harradence, the government aims to draw on past successes, such as the Olympic Development Authority, to promote more direct employment. By doing so, the industry can improve skills, safety, and well-being, as firms view their employees as assets.

However, Harradence also acknowledged that current business models pose challenges to this goal. Many contractors prefer to use self-employed workers, as it offers them greater flexibility and lower overhead costs. Harradence emphasised the need for contractors to have more confidence in the pipeline of work and the strength of the broader economy if they are to increase direct employment. Additionally, the tax changes known as IR35, set to come into force in April, are expected to make self-employment less attractive in the construction industry. Harradence noted that this policy could help shift the model towards more direct employment, which would be beneficial in the face of an exacerbated skills crisis.

Despite these challenges, the government remains committed to promoting direct employment in the construction industry. However, it is not a significant feature of the recently published Construction Playbook, which provides procurement guidance for the civil service and aims to shape behaviours in the industry. Harradence noted that increasing direct employment is a long-term goal that will require sustained efforts and changes in the industry's practices.

Harradence urged firms to bid for public sector jobs at realistic costs and demonstrate their ability to create social value and reduce carbon emissions to achieve this goal. By doing so, the industry can move away from short-term cash flow management and towards investment, innovation, and sustainable productivity. Ultimately, the government aims to create a construction industry that drives investment, improves productivity and performance, and consistently delivers high-quality outputs for its clients by becoming more financially resilient and sustainable.

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