Over the past few weeks the key players in the events at City Link have been giving evidence to an inquiry by the Scottish Affairs Committee and the Business Innovation and Skills Committee of the House of Commons.
First there was Jon Moulton, head of Better Capital, which owned City Link. Then came Hunter Kelly, the administrator for Ernst & Young, and most recently, former City Link chief executive David Smith.
From the questioning it is apparent that the MPs are keen to understand the sequence of events and the alternatives that were considered before it was decided to close the business.
The title of the inquiry is “The impact of the closure of City Link on Employment” and it is clear from the questioning that employment practices are coming in for particular scrutiny.
Like many companies in the parcel delivery market, City Link used a number of self-employed contractors, and it is their status that the MPs seem most concerned about.
At one point in questioning Jon Moulton, committee chair Ian Davidson said: “It was suggested to us that a lot of this was what has been described to us as ‘bogus self-employment’. People working for the company were sacked and then re-engaged as private contractors; they were told they had to buy City Link uniforms and have their vans painted in City Link colours by contractors you specified; and they were told that they could not take parcels for anyone other than City Link, so that to all intents and purposes they were actually still employees.”
And in a question to Hunter Kelly, Davidson said: “We are trying to establish what the procedure is in circumstances where there is a whole chunk of people who seem to us to be bogus self-employed.”
During the questioning of David Smith, the issue was raised again by Pamela Nash: “I want to move on to what for me is the main issue raised by my constituents who have lost their jobs and livelihoods through City Link—the situation around self-employment, or bogus self-employment, at City Link depots.”
The seasonal nature of the parcels market means there are some compelling reasons for the use of self-employed contractors. Companies get the flexibility to bring in contractors for peaks. The contractors trade some employment security for higher earning potential.
So the fact that MPs are questioning this arrangement could have implications right across the sector. This inquiry still has some way to run and it would be foolish to prejudge its conclusions, but it is important to be aware of what is under discussion.
Malory Davies FCILT,