Opening for Australian IT industry amid UK, US contract chaos

Contracting rules are creating a shambles for the UK and US IT industries. Picture: AFP

Behind the Uber driver contracting fiasco in the UK is a remarkable opportunity for the Australian IT industry and our universities.

Indeed, for the universities, it represents the first glimmer of hope in what is set to be a very difficult few years as the tertiary sector adjusts to the looming dramatic fall in Chinese students.

When certain UK Uber drivers were declared to be “employees” by British courts, in Australia there was a flurry of activity speculating that our independent contracting Uber drivers might also be declared “employees”.

However both our Uber drivers and Uber users need not fear - Australia has some of the clearest independent contracting rules in the world and Uber‘s arrangements have been declared “contracting” by the FairWork adjudicators.

By contrast, not only is the UK situation chaotic, but the US looks set to be equally chaotic because President Biden plans pushing through the so-called PRO Act legislation to ban independent contracting.

Around the world, large parts of the IT industry are organised on a contract basis because various skills are required for limited time periods and the contracting system enables those skills to be applied where and when needed. The contractors are almost always well paid.

The employment system can obviously work in some IT areas but for many IT companies it’s inefficient and costly.

Unless the proposed PRO Act legislation is substantially amended, the US industry will need to contract many of its activities overseas.

In years gone by Hong Kong would have taken a lot of the business but the market is now confined to countries like India, UK, Canada, Singapore and, of course Australia.

Although British IT contractors will be able to compete with Australia in the US, in their local UK market they are virtually excluded.

The onslaught on independent contracting in the UK has been organised on two fronts. The first is the “Uber front” where, thanks to legislation passed in 1998, an independent contractor can have some employment rights and those rights make the system very complex.

But it’s the second front—the UK tax attack----that will stop the British IT industry using local independent contracting.

British anti-avoidance tax legislation called IR35 comes into force next month and it demands that medium-to-large private sector firms assume responsibility for determining if the contractors they engage should be taxed in the same way as permanent employees or are really contractors and should be taxed under contractor rules.

Once tax status is the responsibility of the IT company, many British IT companies will declare everyone an employee even though many contractors may not be employees.

Unlike Australia, the rules are vague so it becomes very risky to make a contract arrangement and so, just like the US, British IT companies wanting to operate efficiently will need to do their contracting offshore.

Uber drivers have driven contracting changes in Britain. Picture: AFP

Australia’s great advantage in gaining market share in this US-UK shambles is that our contractors here have clear rules and, provided they comply with those rules, they can tender for both Australian and overseas work.

On the other hand, Australia has a shortage of skilled people.

Too many university courses teach on the basis of past software systems which now have limited value.

Federal education and youth minister Alan Tudge will be under great pressure as the Chinese student numbers decline. This is an area where he can encourage universities to link with corporations and adapt their IT courses to provide the skills that are needed with the aim of substantially increasing the numbers of skilled IT people so our contractors can compete on the world stage.

Given the ill-considered legislation in the UK and US many IT contractors will consider moving offshore and we should welcome them and link that welcome to our clear legislation and the developing university IT skills generation.

When the IT boom was in its infancy Australia believed that it could play a big role in the development, but India has been far more skilled in mobilising its talents.

But the mess in both the US and the UK gives us a second opportunity which we must not miss.

In Australia we often down play our international achievements but at a time when the rest of the world is becoming sucked into a contracting morass, we not only have clear rules but we are also looking to increase the speed of payment from large enterprises to small ones, and we are going to end unfair contracts.

The weakness in our contacting industry is that while the legislated Australian rules are clear, the Australian Taxation Office often ignores those rules and sets its own agenda---often after yarning with mates in the UK.

Worse still, Australia has no working reliable tax assessment appeal system. It’s vital that we increase community confidence by setting up a proper tax appeal system.

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has demanded a “fair go” for the sector in taxation. Her recommendations will greatly improve the current unfair system, but just as we are in setting the international standard in contracting legislation we should do the same thing in tax. The easiest and most effective way to do that is to base it on the new tax appeal legislation on the US. In this area America is a world leader and we know their system works and is very efficient in raising the required taxation revenue fairly.