It Starts With Modern Slavery – Our Top 3 Risks

The conversation always starts with modern slavery — our top three most common risks found in the construction workforce.

Nutral Solutions Ltd specialises in employment practices and temporary workforce management in construction. Nine times out of ten, our engagement with clients begins with discussing how they are looking to mitigate the risk of modern slavery in their supply chain. Often, they are debating whether the risk is worth investing in.

Modern slavery is a horrible and illegal outcome of poor employment practices at the most severe end of the risk spectrum. However, in the world of construction, numerous other risks exist within the workforce that are far more common and carry significant risks.

1. False Self-Employment

The construction workforce heavily relies on self-employed workers, primarily through the Construction Industry Scheme (CIS). Our fieldwork showed that 77% of site operatives were paid through the CIS scheme and Unite Union’s FoI request revealed over 1.2 million workers were paid via CIS through 2022-23. This was a 15% increase on the previous year.  More workers are being put into CIS payment models as it is seen as cheaper and preferred by workers. However, placing workers into this model without the proper assessment and justification carries financial, legal, and human risks.

Failing to ensure that workers are legitimately self-employed for the assignment they are completing can result in charges of facilitating tax evasion, a corporate criminal offence under the Criminal Finance Act, which carries unlimited financial penalties.

The human risk arises from this model depriving workers of employment rights. While CIS is for skilled self-employed workers, it is common to find less skilled and low-paid roles being filled by workers engaged as CIS self-employed. Someone earning £15 per hour receives little to no tax benefit from CIS and does not earn enough to forgo employment rights such as holiday pay and pensions.

The misuse of the CIS system is a risk we encounter on many sites, and although linked with tax and financial legislation, the abuse of CIS self-employment directly impacts working lives by also increasing risks of stress for workers. An example of this may be not taking a holiday due to not being able to afford the time off or working when sick due to not receiving sick pay.

2. Pay Deductions

Our fieldwork for the last year showed that 22% of workers had paid deductions outside of national insurance, tax, and pension contributions. 11% of workers didn’t know if they had any deduction!  Out of those experiencing deductions 71% reported they were payroll admin charges. Wage deductions for the construction workforce are commonplace but are often misunderstood. This confusion results from several issues:

1. employment businesses failing to adequately explain them,
2. deductions being misrepresented, or,
3. workers not paying attention to or fully understanding the information within their employment documentation.

In an industry reliant on temporary labour, agencies and payroll intermediaries process pay and employ these workers. Payroll intermediaries commonly take a margin on each timesheet processed, and this margin is often misinterpreted as a deduction from the worker’s pay. It is crucial to ensure that this margin is taken from the charge rate set by the agency, not the worker’s pay rate. Pay slips are often misread, confusing or just poorly laid out.

The perception is that pay deductions are ubiquitous in the labour supply chain, which is largely accurate. However, understanding and identifying what is legal and what is not is key. Workers too often accept illegal deductions as the norm in their working lives.

3. Hybrid Models

What do some businesses do when they can’t legitimately classify workers as self-employed for tax purposes but don’t want to bear employment costs? They sign the worker to an agreement that splits the employment and payment models! The payment (tax) model is “deemed as” PAYE, but the employment model is self-employed, removing all employment rights.

These models are frowned upon by Government bodies, yet some organisations still openly promote them. They can be easily identified by reviewing the employment contracts of the workforce. This is another common risk prevalent in the construction labour supply chain, depriving workers of many basic rights.

The construction workforce is made up of many non-UK nationals who are not familiar with our tax and employment laws making them more vulnerable to these unethical models. So, if you want to start to mitigate the risks of modern slavery and the wider tax and worker rights abuse in your construction workforce then start by understanding who is involved in bringing workers to the site, who is paying them and how the companies involved are ensuring the workers are engaged legally and fairly. This activity starts to tackle Modern Slavery and importantly also addresses the wider and equally damaging range of risks when engaging a temporary workforce.

Summary

Practices to tackle Modern Slavery have enabled us to identify and understand a much broader scope of risk that sits in the construction workforce. Tackling the risk of illegal workers is still a major priority as bad actors become more sophisticated. Making sure the workforce is not travelling for significant periods to and from the site is also a common welfare risk.

What started as an action to tackle an abhorrent breach of human rights has led to a greater focus on general employment practices being fair, especially for low-income jobs. This is directly reflected in the Labour Government’s new Employment Bill which sets out to tackle a lot of issues which occur in low-income jobs. The major investment in the HMRC will also work to aid more transparent payment practices which protect the workforce by making it harder and riskier for bad actors to operate.

The activities within your Modern Slavery strategy can have a broad effect and support other policies like your Criminal Corporate Offence policy but ultimately these activities reinforce the social impact your company has by making sure the workforce has fair working lives and conditions.

References

Unite the Union. (2023). Shock rise in bogus self-employment in construction. Available at: https://www.scottishconstructionnow.com/articles/unite-highlights-shock-rise-in-bogus-self-employment-in-construction [Accessed 28 May 2024].