It seems that hardly a week goes by without someone calling for the umbrella sector to be regulated, so it is no surprise to find another one hitting the headlines today. This time it has the official backing of Matthew Taylor and the TUC, so what else is different?
This time it is not just rhetoric, rather this call is accompanied by a well-thought out policy proposal which has been submitted to the Treasury, BEIS and other relevant government departments for their consideration. The policy includes proposals such as stopping workers being forced to opt-out of Conduct Regulations; stopping roles being conditional on working through an umbrella; ensuring that workers receive their statutory holiday; and ensuring that workers’ tax and NICs are paid to HMRC.
Why is regulation needed?
The case for regulating the umbrella sector is compelling:
- Off-payroll legislation has increased demand for umbrella firms, in turn increasing the prevalence of dubious schemes as acknowledged by HMRC;
- Workers forced to use umbrellas by their recruitment agency, in the worst cases later finding themselves with very significant tax bills;
- Anyone affected by the Loan Charge debacle will understand first-hand how abhorrent these schemes (which purport to be “umbrellas”) are;
- Recent scandal of umbrellas not paying their workers holiday, despite the end-client having paid this to the umbrella;
- Recent scandal of mini-umbrella companies costing the Exchequer thousands.
What has been done so far?
However, the government has already committed to regulate the umbrella sector! It was originally proposed as part of the Matthew Taylor’s research into modern employment practices in 2017, a recommendation which the government duly accepted. Subsequently BEIS planned to extend the remit of the Employment Agencies Inspectorate to encompass the umbrella sector , but to date this has not happened. Importantly, the new policy paper queries the validity of simply applying the Conduct Regulations to the umbrella sector as many of these are simply irrelevant, and those regulations in isolation would result in the glaring omission of not ensuring tax and NICs compliance.
IWORK’s founder, Julia Kermode, had a key role in drafting the policy and much of her thinking is reflected in the final version. For far too long umbrellas have been in the “too difficult” pot with the government failing to properly understand the sector, failing to plan effective policies, and failing to take action. Umbrella regulation is long overdue now, and there is no excuse for the current hiatus. We urgently need a strategic approach which cuts across all relevant government departments and puts workers’ best interests at the heart of any regulation.