UK employers: beware 'iceberg' liabilities

If there are quiet times for employers, those times are not now.

The number of EU migrants coming to the UK to work is falling and labour markets – particularly for those employing large numbers of low-skilled workers – are tightening. The result is upwards wage pressure. Industries using temporary or outsourced labour, such as hospitality, already have to pay 15% over the national living wage to appeal to workers.

Businesses are operating in a climate of increased levels of regulation, scrutiny and enforcement, which is a problem for some more than others. Driven by the Director for Labour Market Enforcement, Sir David Metcalf, HMRC is actively conducting employment status audits, which can expose non-compliant business models as well as giving rise to tax liabilities for both employer and worker. These 'iceberg' liabilities can affect business in a similar way to the wave of cases in the 1990s when TUPE regulations were first applied to outsourcing. The drive from HMRC to collect tax more efficiently is also exposing hidden liabilities, such as years of unpaid holiday pay and minimum wage breaches.

Pressures are coming from below as well as above. Some unions are focused on re-organising fragmented workforces. In healthcare, UNISON, for example, is looking at ways to obtain employee/contractor parity. The hospitality sector and users of support services may be affected by litigation which promotes the idea of the 'joint employer' in a University of London case.

Employers sensitive to these market changes need to look at the sustainability of their supplier arrangements, because end user liability is a growing risk.