Unions hold day of lobbying against umbrella companies

Nick Elvin

Union members held a day of lobbying across the UK to protest against what they say is the exploitation of workers by umbrella companies.

Unions taking part last week, including UCATT and Unite, say tens of thousands of construction workers have been forced to work via umbrella companies – firms that act as an employer to agency contractors who work on fixed-term contract assignments – since April 2014 when the Government introduced new measures which require workers to be paid via PAYE.

They say by forcing workers to be paid via an umbrella company, neither the agency, contractor nor the payroll company are liable for increased costs. Instead they are met by the worker who has to pay both employee and employer national insurance contributions.

Steve Murphy, general secretary of construction union UCATT, said: “Construction workers are being exploited by construction companies who are prepared to use every trick in the book to boost their profits at the expense of workers.

“The Government needs to take urgent action to crack down on this tax misery which is resulting in workers struggling to make ends meet, while employers are feathering their nests.”

However, the Freelancer and Contractor Services Association (FCSA), the trade association for the umbrella sector, believes umbrella employers are being wrongly criticised.

It says a trend of construction workers transferring to an umbrella from their previous self-employed status is due to recent legislative changes aimed at preventing false self-employment, with agencies now liable for employers’ tax arising from placing workers deemed to be falsely self-employed.

“We are increasingly concerned that the reputations of respectable businesses are being tarnished by the various media reports implying that umbrellas are a ‘con’,” said FCSA chief executive, Julia Kermode. “We strongly refute this assertion, and believe that the real issue is poor communication to workers.”

Kermode added that workers receive employment rights and statutory benefits, which they would not have when self-employed, while umbrella employers are legally obliged to pay employers’ national insurance, as well as process the employee deductions.

She continued: “The problem is the workers’ expectation to receive a particular pay rate set by their agency. Agencies should take responsibility for ensuring that the rate they agree with an umbrella is sufficient to maintain hourly rates previously paid to the worker, or to explain any difference to the worker.

“FCSA members are required to adhere to a strict code of conduct, and demonstrate their compliance annually by passing an independent assessment undertaken by regulated accountants and lawyers.

“We are keen to work with all political parties and unions to ensure that good practice is the norm and stamp out bad practice where it exists. We must work together to ensure that our sector is not unfairly targeted as a result of misunderstandings, or tarnished by the actions of a minority.”