My name is …. and I once worked under a personal service contract

I first came across a personal service contract in the early 1980s when I was employed by a local manufacturing company in the IT department.  One of the programmers set himself apart. His working day was not altered by the cycles of activity in the company.  He would arrive after us, leave before the rest of us, sit and code;  and avoid office conversation except very occasionally to contribute – and then only briefly – to technical discussions. I remember being astonished to learn he was a subcontractor, and to get a hint of how much my employer was paying (for) him.


From the mid-1980s until the dot-com bubble burst, contracting boomed in the IT sector. I’m not saying we all subcontracted, but large numbers of us did so for some or all of that period.  There was a business logic – it was said – that for the project work which made up a significant proportion of IT activity it was more efficient to hire contractors for fixed periods and retain permanent staff to work on the underlying service. For programmers and analysts contracting rates were higher  – sometimes much higher – than salary rates, and there were always contracts available; particularly in the finance sector which never had problems funding new projects. The challenge for subcontractors was to get the work, the challenge for businesses – at least so it was commonly agreed – to manage so many individual subcontracts.


This interface between IT subcontractors and companies was immediately occupied by agencies,  who agreed a contract with a company for the supply of IT subcontractors and a contract with the limited company set up by each and every IT subcontractor who sought work through an agency whenever they could place the subcontractor with a company. For this and for passing on the payment from the hiring company (less the agency commission) through invoicing the agencies made their profits. The IT subcontractor very typically worked through a series of personal service contracts.


It’s easy to forget how immature the IT sector was in the 1980s. IT skills – analysis and programming skills particularly – were in short supply as businesses implemented and built their IT systems and radically changed ways of working. As with all bubbles, IT subcontracting seemed like it would make everyone a winner: companies were more likely to get access to skilled resources as and when needed, IT professionals could get well-remunerated work as they wanted it, and agencies also made handsome profits. This was surely the exemplar of ‘flexible working’ which every other industry should copy.


For a business owner or manager  – particularly of a small business – seeking skilled and experienced IT people outside of the finance sector, or outside of the south-east – even outside London – this may not have seemed so wonderful as those people were overwhelmingly attracted to the rewards in the banking sector, which meant the City. If you owned or managed a business seeking to appoint and retain skilled IT professionals to develop – and develop with – your business, the loss of staff to subcontracting was a risk that was difficult to manage. The seemingly perfect model of permanent staff supporting service while contractors came for projects and left again was difficult to maintain, and many permanent staff left companies to subcontract with competitors, supporting their services. From a business perspective, this simply couldn’t continue.


Many IT subcontractors believed – possibly still do – that the bubble was burst by Chancellor of the Exchequer Gordon Brown and the legislation which became commonly known as IR35.  More probably it was the rapid maturation of the IT industry. Large and efficient IT services companies simply replaced the individual subcontractors because they could provide not just outsourcing but large and complex programmes. Meanwhile the numbers of people with IT skills rose dramatically, and the shortages in skills and competencies moved to areas such as IT project and programme management. The Internet permitted global competition from low-cost IT companies in Russia or India and from services provided by IT giants such as Microsoft and Amazon. IT subcontracting in the IT sector rapidly transformed into low-reward, contingent freelancing.


Originally formed to fight against IR35, the PCG still lobbies on behalf of freelancers (in any business sector). It argues that personal service companies are a consequence of the ‘flexible employment’ which governments and employers have been trying to achieve, and that government should create alternative arrangements for self-employed to use. Richard Murphy argues consistently that tax avoidance can be identified whenever an accounting or business arrangement is put in place that has no business purpose other than to reduce tax liability, that there already exist alternatives for the self-employed to use, and that the limited company is too easy to form and too open to abuse.


The use of personal service companies sits at the convergence of what appear initially to be two complementary ideas, and which turn out to be a very tight positive feedback loop. One is the ideological drive by employers to have the use of employees without any responsibility as an employer; the other is the ideological trope of ‘individual responsibility’, where persons seek employment without any responsibility towards an employer. The personal service company enables both parties to achieve this, with the added ‘benefit’ (to the two parties, not to anyone else or to society in general) that both reduce their tax liability. Denial of responsibility to others and to the state; ‘individual responsibility’; tax avoidance: neoliberalism.


In response to a report that the BBC has 25,000 people on such “off-payroll contracts” (13,000 of whom are on air) Margaret Hodge MP, Chair of the Commons Public Accounts Committee, argues strongly that avoiding paying tax and national insurance in the public services is “not fair”. That seems a very kind statement. Many who are struggling to retain the National Health Service might well challenge the very notion that the BBC provides a service to the ‘public’. The recent history of the BBC as part of the UK TV and Films sector does clearly demonstrate that the consequences of ‘flexible employment’ are more destructive even than loss of revenue. It serves as a dire warning.


In her recent study Irena Gugulis, Professor of Employment Studies at Durham University, analysed the impact of the last two decades on employment practices in the UK media. She argues that at the end of the 1980s, the BBC began to change with the media industry from a monolithic body with defined managerial and career structures to one which commissioned rather than produced, and replaced careers with self-employment. During the next decade, the media sector became a sector of many small companies using the self-employed on short-term contracts (sometimes production by production or even more temporary). Professor Gugulis found that in an industry where self-employment predominates, career structures break down. For the self-employed, moving from one role to another – even similar or closely associated roles – within the same industry requires that you start again at the (very) bottom. This was a problem faced by the IT subcontractors in the 90s, forced to retrain themselves on new technology  and systems as the industry changed. But for the self-employed in the media industry, the bottom is now a lot lower.


The media industry is marked by unpaid work and unpaid internships. Employers who want employees without having any responsibility toward them will see no logic in employment benefits, and ultimately feel no need to pay them for their work. Someone wishing to change career role within the industry must be prepared for  perhaps years of unpaid or very low-paid work. Moreover, unpaid work and unpaid internships act as barriers to entry into work and into the sector by those who cannot afford to work without pay. Unpaid work introduces a bias against anyone without wealth, or with family responsibilities, or with dependencies such as disability.


The breakdown of a career structure removes value from a curriculum vitae, and the meaning from job titles. Within a large organisation where permanent employment is the norm, career levels are apparent to all employees. Career progression can be planned and attained, and the job titles, achievements and competencies held have a meaning to other potential employers in the sector. This is destroyed when employment is replaced by self-employment. The income of the self-employed is always determined by the current piece of work: the market replaces personal development. When CVs are effectively meaningless and work is piece-work, the self-employed have to find an alternative route to secure their next piece of work. The consequence is that selection based on experience and achievement no longer functions, and work is instead gained through personal networks.


What makes someone employable is not being available and having the appropriate skills and experience, it is being known to be available by someone they have worked for or with previously. What gets them employed is not their skills and experience, or talent: but, Professor Gugulis asserts, whether they they will fit in. To get employment, you have to fit in. To fit in, you have to be like everyone else. The sector is populated overwhelmingly by people from the upper-middle class: but not just occupied, it has also been secured. If you do not ‘fit in’; if you are not part of this social background and milieu: even if you do not dress like everyone else, you are locked out. By creating a ‘flexible workforce’, the sector has been rigidly secured and protected from incursion by people from other classes or other ethnic groups.


Not only has entry to the sector been blocked: Professor Gugulis interprets her research to show that within the industry, gender roles have been re-enforced; with women assigned to clerical and administration, and barred from the creative areas of the sector. This is not her conclusion, but it seems the ‘flexible workforce’ is part of the war on women.


It is outside the scope of Professor Gugulis’ work, but it is necessary to speculate on how the occupation of roles in the BBC by a self-serving elite formed of self-employed members of the upper-middle class effects the ethos and output of the BBC.  In a piece I wrote earlier this year for Open Democracy’s ‘Our Beeb’ work, I posited the view that the BBC was lacking in self-awareness, particularly of its failure to question right-wing views, and especially of its complete failure to inform the public about the Health and Social Care Bill. I charged it with demonstrating the Dunning-Krueger effect. Perhaps it’s because it has been turned into a gravy train for a small clique of public schoolkids.


If the public perception of the BBC is that it remains the stuffy Reithian preserve of people named Dimbleby or Attenborough when it is clearly nothing like this any more, then public perception of “civil servants” as a bunch of Sir Humphreys is possibly even wider of the mark. The Commons Accounts Commitee’s request for information was prompted by the knowledge that the head of the Student Loans agency was on a  personal service contract. It seems this is common across the civil service. This undermines democracy. A civil servant who accepts a personal service contract effectively undermines the very state he or she is intended to serve, and erodes their credibility and authority.


The journey to a ‘flexible workforce’ is a dismal one. On the journey, revenue will be diminished, careers will be lost, organisations disorganised, employment made insecure, earnings reduced, the majority blocked from whole sectors of employment, gender roles re-established, ethnic groups discriminated against, the disabled further penalised, businesses made unable to plan long-term, skills lost, public service destroyed, and the state itself undermined.  Are these unintended consequences of pursuing a ‘flexible workforce’? Quite probably not.



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