2022 was certainly a roller coaster of a year in every way. With changes to our government, political unrest, continued recovery from the covid-19 pandemic, and one of the biggest financial crises since the second world war, there was certainly a lot to adjust to. In this article, we look at the biggest employment industry changes of 2022 and what we might have to look forward to in 2023.
In early 2022, the UK government invited contractors to come forward and answer a range of questions to help them gather evidence about the role of umbrella companies in the current labour market, so they could begin to look at areas where regulation is required.
The consultation was believed to be a preface to a single enforcement body, which had been touted as the answer to much needed umbrella industry regulation. But despite a further call for evidence around compliance and enforcement later in the year, the SEB has yet to be announced. Could this be a change to look out for in 2023?
Umbrella companies have two main ways of paying holiday pay, one by accruing the holiday pay to be paid as a lump sum on the contractor’s request, and the other, the rolled-up method, which is where the holiday pay is included in their monthly payslip.
A high profile ruling in January found that one company had failed to inform a worker of a requirement to request holiday pay before the end of the year or lose the money. The worker won the case, and back pay was issued. Although the ruling has not been made law, the case did lead to greater transparency, with contractors being given more understanding of their entitlement to holiday pay.
We at JMK have always, and will continue to, pay out 100% of holiday pay, and inform our workers of their holiday pay entitlement.
HMRC acquired new powers in 2022, to name tax avoidance schemes and their promoters, to help protect workers who might be tempted by non-compliant umbrella companies who advertise lower rates of income tax. The list currently comprises 23 tax avoidance schemes and promoters, but HMRC recently reported that they have their sights on a further 70-80 schemes, signalling that the list will grow in 2023.
JMK are proud to be a fully compliant umbrella company and welcome any move to protect the industry from tax avoidance.
In 2021, then Prime Minister Boris Johnson announced the controversial Health and Social Care Levy, a 1.25 percentage point increase on both workers and employers National Insurance (a total 2.5% increase for umbrella workers) to be implemented in April 2022, with a further increase of the same amount in April 2023. But the Levy was reversed by doomed Chancellor Kwasi Kwarteng in his 22nd September budget. The repeal took effect on 6th November 2022 and means that the increase in 2023 has also been cancelled.
This has led to much confusion, with everyone unsure of where they stand. JMK always ensures that the correct income tax and NIC contributions are deducted from contractors’ pay and are always here to advise both contractors and clients about the current legislation for the appropriate deductions.
Arguably, none of the changes reported in the 2022 budget caused more of a stir than Kwarteng’s announcement of the IR35 reform appeal. This was a promise to reverse the much-criticised IR35 reforms of April 2021, which placed responsibility for determining IR35 status firmly in the hands of end hirers, causing huge upheaval for the entire contractor marketplace. With contractors closing their limited companies, and many businesses announcing an outright ban on using contractors, it was one of the biggest changes seen in recent years.
After Kwarteng’s departure, the repeal was retracted, and the IR35 reforms stand. But, with IR35 being such a controversial issue, it is likely that we haven’t heard the last of it yet. JMK will continue to monitor the situation. In the meantime, if you need advice on IR35 as a contractor or end-hirer, do get in touch.
2022 was a huge year for the employment industry, with changes for all types of employers and workers. We continue to see shifts to the way we work, with hybrid working and the gig economy maintaining an upward trend. The skills shortage will likely continue well into 2023, as employers struggle to find the right people in a cash strapped economy. This means that employers might need to think of new ways of meeting their employment and recruitment needs.
And of course, in 2023, we all hope for regulation of the umbrella industry, to protect workers and ensure that compliant umbrellas like JMK can continue to provide a much-needed service to contractors and clients.
Happy new year!
Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions.
We have evolved to provide a range of expert services; such as Funding, becoming a leading provider to the contracting industry.
We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.
With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.
Have a look at the wide range of services our Funding can provide to you and your business, it is far more than just payroll and finance.