Tax and employment rules for 55+ no longer fit for purpose?

As the dust settles on the Election and Labour gets to grip with the reality of governing rather than opposing, there is one issue that needs addressing urgently.  That of employing the 50+ generation. Particularly our tax and employment rules for them.

I have posted extensively on LinkedIn about the ridiculous state of employers failing even to interview let alone employ the 50+ generation.  Age discrimination is rife but few are challenging or prosecuting.

Another issue emerged last week. We do not have an employment system that is fit for purpose to employ people aged … probably 55 and over, including people of pension age.

What are the tax/employment issues causing problems?

Let me explain this latest issue and then punch out what I think the government needs to do (and a caveat: I am no lawyer or employment specialist.  Some of this is technical and I may not have the right technical terms – but hopefully it is enough to make sense)

Last year John (name changed!) retired. At that time he wanted to be properly ‘retired’ and travel – lots – and spend time with his family, in particular his adorable grandchildren. But he is a generous soul and knew his experience would be helpful to others and started doing a bit of advice here and there.  Lucky us, one of those was with Next-Up.  

At Christmas, I asked John if he would join our business planning session. He added a lot of value and I could see he really enjoyed using his experience to help us. He offered to follow through with a few ideas.  We paid John’s expenses but he generously helped without charging. Then some of these ideas gained traction, we had detailed planning discussions and John said he would like to work with us properly.  Not full time, maybe a few days a month – and he still wants summers off.

We were delighted. Then began the challenge. John isn’t doing enough to want to set up a company, employ an accountant, submit returns and all that hassle just to put in a few invoices now and then.  But equally, he doesn’t want to be an employee – he wants to be in control of his time and what he does, when.

What are the options for a 55+ who doesn’t want to set up a company – or be employed?

We asked our accountants and lawyers – what options do we have? And these look like the possibilities – none of which is ideal

He can be a consultant and invoice us

But. He must bill two or three companies or the taxman says this is employment under another name. It comes under what used to be IR35, but as of April this year seems to be called ‘Off-Payroll Tax’. The tax rules state that a worker, known as a contractor, should pay the same amount of Income Tax and National Insurance as an employee in the business.

He can be an employee and we pay National Insurance and holiday pay.

But John really doesn’t want to be an employee – he wants to do as much or as little as he wants. Have the ability to say – at a moment’s notice – I need to help my grandchildren or elderly parents.  We have had this numerous times with our team over the last few years and we are really happy to make this work for everyone.  This is what our pledge to be an Age Friendly Employer means to us (more on that later)

We can employ him on a Zero Hours contract 

Acas says “Zero-hours contracts can be a flexible option for both employers and workers. For example, if the work is not constant or is ‘as and when’…. most people understand this term to mean: your employer does not have to give you any minimum working hours; you do not have to take any work offered”. So John is going to be an employee – which he doesn’t want – but it does give the flexibility we are all wanting and we all want/need to be law-abiding.  We have to pay him holiday pay and apparently this means rolling up 12.07% into his invoice to account for this.  Oh. I guess it isn’t an invoice – a timesheet?

He could continue helping us on a voluntary basis

But we have reached a point where we are all uncomfortable with this.  We have had so many helping us ‘for free’ right from the start of Next-Up. We wouldn’t be where we are without this and I am incredibly grateful. But as we started becoming a ‘business’ it felt wrong not to pay. We have worked on the basis where, if we are generating income, we try and share that with those helping us

Current tax rules are just not fit for this generation. 

Age Friendly Employer pledge

Surprisingly, we hit a similar problem with the Centre for Ageing Better and their Age Friendly Employer pledge.  Of course we signed up. I was really keen to see what they think is important. They have been actively campaigning for employers to offer flexibility to this older generation, as an example.

However, they are very focused on experienced people as ‘employees’ rather than what many of this generation actually want. That is to do interesting and good quality ‘work’, be paid fairly for it and have flexibility so they can help look after elderly parents and grandchildren. They also want to choose when they work, often to have the summer off and many want to travel in blocks of time.  Above all, to be in control of their time.

Are the tax and employment rules preventing some people from working?  Who could help the economy?

In technical terms, Next-Up only has one employee aged over 50.  But we have dozens of experienced people who work with us in all sorts of ways. Last year we paid 56  people aged over 50. We see many of these as a real part of Next-Up – some on our website and on LinkedIn, they come to our Christmas party, join our business planning days, we do birthdays on  Zoom and send cards and more.

And I think this is actually a whole issue/opportunity. There are thousands of people aged 55+ who want to work this way and I see as an opportunity for businesses, charities, entrepreneurs and more to get extraordinary experience in a whole new way. I wrote about this new economy here. 

Because we had signed the Age Friendly Employer pledge, I wanted to test out what this means to our colleagues. We carried out a survey and have had 20+ replies so far. 100% say they rate us as an age friendly employer.  We would be seriously worried if we weren’t – it is what we do!!

What does an Age Friendly Employer mean?

First, we asked what an Age Friendly Employer meant to them.  They said

• Thoughtful about what I want out of life at this stage and flexible in adapting to those needs
• Respecting timing of meetings
• Providing interesting, quality work without too much admin

So how well do they think Next-Up respects their priorities?

• 100% answered 9 (this was a sliding scale with 10 the max) and
• 100% said they rate Next-Up as an age friendly employer

We asked what could we do to improve working with us. I was interested they want to be more involved in our business, know more of what is going on and to meet each other more. We are clearly over-respecting their time for relaxing and family!

I share this, because hopefully it shows we understand this market and have a good feel for structuring work to meet their needs.  We are trying to walk the talk of using the talent of this generation, but we need to change working practices/tax rules if it’s really going to work.

So back to this tax stuff. I should say I am almost puritanical about paying taxes so this is absolutely not about anyone trying to avoid paying tax.  I am also passionate about paying people fairly, so this is not about trying to get cheap labour or treating ‘employees’ shabbily.  It’s about creating an economy from people who are otherwise playing golf or sitting at home reading the paper.

What rules could help this 55+ generation to work more?

My husband and I went out for a drink last night and I asked him what he thought the tax rules/employment rules should be (romantic evening, hey!).  We were on similar lines.  The key point is that we think we need to give people aged 55+ an option to earn money without bureaucratic hassle.  My husband thought it should be over 60, but I think it needs to be younger – people are retiring ridiculously young.

I think that if someone meets one or more of the following criteria, then you can earn money, invoice and declare it as income on your tax return, without having to worry about IR35/Off-Payroll Tax, setting up a company or having three paymasters. My thoughts on the criteria are you have to have/be one or more of the following

• Be aged over 55 and not in full-time work
• Have ‘retired’ from a full-time or part-time job
• Have left an employer where you worked for 30 years
• Be working for just one employer
• Not be earning more than, say £20k or £25k

On the last point, I think it is important to have an earnings limit.  In my mind, this is for people wanting to do projects here and there, hence the suggested ceiling of say £20k or £25k.  According to the Office for National Statistics, the average earnings for employees in the UK is £34,963 so definitely not more than this – if people are earning £50k or £100k then that is serious earning and the rules feel fair enough. They can set up a company and all that involves.

Please share what you think – especially if you are an expert

What do you think?  Love to hear from you, especially if you are an expert in this field – either tax or employment.

I recently posted about the idea of this generation being an untapped economy and loved this comment from Charlotte Gibson, a director at Cushon, a fintech workplace savings and pension business.  I thought this should be the last word on this topic – it is an important economic issue.

PS As an addendum, I discovered a government site to check what your employment status is. This is what I filled in – sadly the result was ‘unable to determine’. I wasn’t sure about some of the answers, they are grey areas and I need to discuss with John. It shows just how complex this is!

https://www.tax.service.gov.uk/guidance/check-employment-status-for-tax