I like to try to pick up on topical issues in my articles so in the last edition of the ARB Magazine, I wrote about recruitment and staff retention as this is by far the most common problem amongst our client base of contractors. I work with a different company every day and literally, as soon as I walk through the door, the conversation starts with ‘Where can we find staff?’ As I leave it becomes ‘If you hear of anyone looking for a job, point them in our direction.’
I honestly can’t understand how anyone can be unemployed in the UK.
More than I can ever remember, team leaders and climbers are leaving to start their own businesses. These essential staff are leaving good companies with good wages, highend equipment, pensions, provided PPE etc. to go and be jobbing tree demolition merchants in the low-end domestic market.
The industry is diluting as established organisations lose people who start small enterprises with their mates or, worse still, become ‘freelance’ climbers.
In my last article I described how this trend is causing a horrible situation:
- The small operators are breeding like bacteria and are wrecking the rates for domestic tree work by creating a saturated market amongst the bottom feeders.
- Freelancers offering mediocre performance at ridiculous rates and working for the good companies that now have a skills shortage are making the gap between the rates of the small operators and the professional companies bigger and the profit lower.
In this article I would like to examine the ‘subbie’ situation. ‘Subbie’ is a term very commonly used to refer to everyone and everything from a freelance climber to a distant great company that is undertaking work on a contractor’s behalf.
Probably the best place to start would be to clarify some terms. I am going to break it down into two categories: ‘subcontractors’ and ‘not sub-contractors’.
A hired expert should arrive with everything they need and have no problem in providing you with copies of certificates and evidence of their tax affairs.
‘Subbies’ is a shortened term for subcontractors. Sub-contractors undertake a contract from the contractor and carry out work that a contractor cannot do but for which the contractor is responsible.
The ARB Approved Contractor Scheme includes the use of sub-contractors as part of the assessment criteria:
Sub-contractors*/consultants (if applicable)
- To have procedures in place to ensure appointment of competent sub-contractors/consultants.
- To have arrangements in place to monitor sub-contractor performance.
The guidance on what the assessor should look for is:
- Sub-contractors are engaged on a clear, written, contractual basis.
- Evidence showing how you ensure subcontractors are competent including examples of assessments you have carried out.
- Public liability insurance levels.
- PPE provision.
- Details of service.
- Evidence of training and competence.
- Evidence showing your methodology for undertaking sub-contractor performance assessments.
The scheme standard gives a definition of a sub-contractor:
The ArbAC scheme defines a sub-contractor as a separate business entity providing a bespoke operation/service (e.g. timber haulage, stumpgrinding) that is outside of the mandatory requirements of the ArbAC Standard.
The way I regularly explain it to our customers is as follows: a sub-contractor undertakes work for you, but they are responsible for setting up their own safe system of work. You as the contractor are responsible for making sure that they have set up an acceptable safe system of work which complies with your contract requirements.
The safe system of work that you must expect includes the sub-contractor’s arrangements for:
- Risk assessment
- Training and competence
- PPE issue, replacement and checking
- Supervision on site
- Work at height plan
- Vehicles and plant compliance, maintenance and checking
- Thorough examination of climbing and lifting equipment
- Co-operation and co-ordination with the activities of other contractors on site
- Site set up including traffic and pedestrian management
- References and examples of previous contracts
Evidence of all of this would normally be submitted to you to hold on file, along with a method statement describing exactly how they intend to carry out the work.
Once approved, they can be given the go ahead to start the work. You should then make a point of doing some drop-in checks to make sure that what they said they were going to do is what they are actually doing and to check that the work is being completed to the required standard.
Sub-contracting is very common and many of our customers sub-contract to each other around the country because they know that everything is in place and the company can be trusted. They, of course, also have our introduction and reference behind them.
Once the work is complete, the contractor should check the site to see that all is as agreed and expected so that payment can be signed off.
The ‘not sub-contractors’ category includes:
- Freelance climbers
- Freelance ground staff
- Labour-only anybody
- Anyone that works under your safe system of work
These people are not sub-contractors or ‘subbies’. Someone who joins your team and you pay them by invoice is a self-employed, part-time employee. They must be managed and treated in exactly the same way as your employees when they are with you.
When I work with a company:
- I turn up at the agreed time and location.
- I say hello and share some industry news.
- I drive an appropriate, well-maintained vehicle.
- I am dressed as the day requires.
- I bring my own phone, laptop, pens, pencils, etc.
- I have paid for all of my own certification to allow me to do the job to the highest standard.
- All discussions and company information that are not already in the public domain are absolutely confidential.
- We pay tax and if you asked me to prove it, I would direct you to the accounts uploaded to Companies House.
- We hold the usual suite of professional insurance.
Typically, when companies use so-called freelance climbers etc., what I see is as follows.
The climber turns up in a banger when it suits them. One bloke recently was unable to provide copies of his driving licence or competence certificates because they were locked in his ancient 4×4 that could not be opened due to a lock malfunction. The truck had been abandoned in front of the unit for weeks awaiting attention.
They announce themselves to all that will listen with a theatrical flourish … ‘I am Connor MacLeod of the Clan MacLeod. I was born in 1518 in the village of Glenfinnan on the shores of Loch Shiel. And I am immortal.’ This is a quote from the movie Highlander (1986) and every time I see a freelance climber strutting about the yard like a prize rooster, I hear it in my mind.
It is ever so common for them to be wearing the wrong class of chainsaw protective trousers because they need the additional lightness and flexibility of type As up the tree in order to achieve their legendary performance.
They jump in the company truck and use the company tools but don’t maintain them. That surely is the job of some lesser mortal and anyway they don’t have time because they are due to fly off into the sunset to demolish some other poor tree in distress.
They are inadequately certified to undertake the job that they purport to be the best in the world at. After all, in their opinion, ‘Competence is obvious, isn’t it?’ and expecting them to hold a certificate to prove it is unreasonable. How many times have I heard ‘If you are going to insist that I have an aerial tree rigging certificate then you have to pay for it and pay me for the day. Them around the corner are not bothered.’
They say that they don’t need an independent thorough examination of their climbing kit because they themselves are competent, but again, if you insist, they are very happy for you to take care of it for the benefit of everyone that they work for.
‘Loose lips sink ships’ as they used to say during the war. Not so with today’s generation of arboricultural superheroes apparently. ‘Singing like canaries’ is a more fitting catch-phrase.
Their tax affairs are often ‘mysterious’. Be suspicious of anyone who says that they couldn’t manage the pay cut to become an employee, because they are either thick or not paying tax. If they factored in PPE and equipment provided and replaced free of charge, funded training, employer pension contributions, paid annual leave etc., how on Earth could they be worse off as an employee?
I worked with a company many years ago that had used a freelance climber and paid him in cash. This happy-go-lucky chap lived on a canal boat and would turn up in his beat-up Montego Estate clutching his trusty top-handled chainsaw. We didn’t like to share a crew cab with him because he smelled like he had never washed but he was a pretty good climber. He would recount tales of swashbuckling adventure and tell us that when we had grown hair on our chins, we too could become wandering minstrels.
It all sounded very romantic and I must admit, there was a period in my career when I was a freelance climber (about two months). It was awful! I would be hired in to do all of the dangerous jobs and Lombardy poplars, I had to provide all of my own PPE etc., no paid holidays, no pension – oh dear, no, no, no! So, I got a proper job with an Approved Contractor instead.
Anyway, back to the tale of ‘My name is Inigo Montoya, you killed my father, prepare to die!’ (sorry, Princess Bride (1987) – couldn’t resist it).
One day our hero met a fair maiden and fell in love. They decided to get married and buy a house so, hand in hand, off they went to the building society. Mr Bradford and Mr Bingley asked all about types of mortgage and deposits and upon discovering that Mr Montoya had been getting paid in cash, they had a quiet word with HMRC. Banks and building societies must follow strict rules in respect of money laundering and tax avoidance.
The awfully nice man from the tax office dropped in at the canal boat and asked a few questions only to discover that whilst being a good climber, Mr Montoya was not very good at keeping records or saving money. The taxman asked him how much he was paid per day and then how many years he had been working for the company. Extrapolating that information resulted in a mighty tax bill which, unfortunately, our scruffy little friend could not pay.
Can you guess what happened next? The taxman sought to recover the unpaid tax from the company which, as a result of the lack of invoices and records was unable to challenge the claimed significant amount. They had been negligent in ensuring that Goblin Tree Services had been paying his dues apparently.
As for insurance, this type of climber’s opinion is usually that they can leave a trail of destruction behind them and then bid you a fond farewell in the knowledge that you will pay for it all. I know a local operation that makes them pay for their own damage and the company has a fast turnover of freelancers. ‘They don’t like it up ’em, Captain Mainwaring!’
I think that I have made my point and as you can probably tell, I am not best chuffed about the current grey labour market.
If you are stuck in the trap of having to use freelance people (probably your previous employees who have stabbed you in the back), you must manage the relationship carefully to stand any chance of avoiding health, safety, employment and tax problems.
Before you deploy them with a team, you must:
- Induct them against your induction checklist – they must tick and sign their agreement to everything that you brief them on.
- Copy all certificates for their personnel file. If they don’t have the required certificates, turn the blackguard away and hire someone that is worth the money.
- Copy their driving licence and run a DVLA check if they are to drive your vehicles. If the driver has any points or history of being banned in the past, you must tell your insurance company so that they can calculate the additional risk and additional premium. I have been working with a company that took on a driver and when they checked with the DVLA, they discovered that he had had a period of being banned for drug-driving several years ago. Even though he was now permitted to drive again, the insurance company refused to insure him, so he had to go.
- Have them sign a written agreement for their services.
- Ask them for the address of their accountant and for evidence that they are paying tax and National Insurance contributions. If they can’t provide this information or they get the hump about you poking around in their business, again, turn the blackguard away and hire someone that is worth the money.
- Inspect their PPE to make sure that it meets the required standard including, Type C chainsaw protective trousers for aerial work. If it isn’t right, don’t use them until they turn up appropriately dressed.
- Inspect all of their equipment to make sure that it meets the required standard. If it isn’t right, don’t use them until they turn up appropriately equipped.
- Ask them for a copy of their last thorough examination report for all climbing and lifting equipment.
- Ask them for a copy of their insurance certificates in case they cause harm or loss while working with you.
- Watch them work until you are sure that they are working in line with your standards and policies.
The industry has to weed out the parasites and make sure that we only use the services of true experts. A hired expert should arrive with everything they need and have no problem in providing you with copies of certificates and evidence of their tax affairs.
The times might be changing, though, as I have recently become aware of the HMRC CEST test. Put the term into your browser and take a look. In the last couple of months, two new customers have asked me to provide them with an HMRC CEST certificate. We employ people, we operate through a VAT-registered limited company, our accounts are available for all to see at Companies House and we have a really good credit rating with all of the credit-checking agencies but these customers would not use us until we had provided them with a certificate from HMRC to state that we are a genuine business-to-business relationship.
For us it was easy to quickly work through the tick boxes to generate the certificate, but I have since tried the process as though I was a self-employed climber. If I ticked the boxes with that scenario in mind, it was impossible to achieve any other result than the company must actually employ me on PAYE.
The two key factors were:
- Is the engagement as a post-holder?
- Can the person be substituted from the same organisation and would the receiving organisation be happy about it?
For me in my normal role, I am a visiting adviser and I am not acting as an officer of the employing company. If I was sick on the arranged day, I could send one of my colleagues to do the same job and my customers would enjoy the same service and advice.
As a freelance arborist, however, I am joining a team as a climber, using the organisation’s equipment, the organisation’s trucks, so I am a post-holder and if I was poorly and sent a mate, the receiving organisation wouldn’t be very happy because they would have to go through the whole induction process as listed above.
The relationship becomes even more blurred if the organisation has a history of providing training, providing PPE and insuring all harm and loss.
On the HMRC CEST website it states:
Use this service to find out if you, or a worker on a specific engagement, should be classed as employed or self-employed for tax purposes.
Use the check employment status for tax tool to:
- see if HMRC will treat you as employed or self-employed for tax purposes if you have or expect to have a work contract
- find out the employment status of a worker or an individual you engage or represent
When to use the tool
Use the tool to check employment status when:
- you are hiring a worker directly
- there has been a change to an existing contract or service agreement
- your worker disagrees with a determination you have provided them
Choose answers that best match the usual working practices of the engagement.
Before you start
You will need to know:
- details of the contract
- the worker’s responsibilities
- who decides what work needs doing
- who decides when, where and how the work is done
- how the worker will be paid
- if the engagement includes any corporate benefits or reimbursement for expenses
It seems to me that there is a move towards the employing organisation being able to justify the terms of engagement using an HMRC CEST certificate. I am curious to see how this plays out in our industry because if it is as it seems, it will be almost impossible to work as a freelance individual.
As always, best of luck and if you need any more information on anything I have mentioned above please do get in touch.
Paul Elcoat runs Elcoat Ltd who specialise in helping arb businesses get things right and win work. Paul would be happy to take questions or comments from readers by email: firstname.lastname@example.org or telephone: 020 7193 5611 or 07800 615900.
This article was taken form Issue 188 Spring 2020 of the ARB Magazine, which is available to view free to members by simply logging in to the website and viewing your profile area.