Regular readers might recall a number of cases last year where umbrellas were criticised for “skimming” amounts from contractors, and Orange Genie was accused of “secretly deducting” £2 from their umbrella workers. Around the same time, Orange Genie’s membership of the Freelancer and Contractor Services Association (FCSA) was suspended for six months for breaches of FCSA’s code.
Last week, FCSA’s Independent Arbitration Panel published their conclusions after reviewing the matter following Orange Genie’s six-month suspension, and you can read their report here.
So was it skimming?
No, not according to the independent arbitration panel who concluded that Orange Genie did not “skim” this money. The panel considered the situation in the context of the legal definition of “unlawful deduction of wages”, i.e. the deductions would be unlawful if any of the following applied:
- it was not required or authorised by legislation;
- it was not authorised in the contract of employment;
- there was no written consent before it was taken.
Given the £2 deductions were taken from a worker’s assignment rate as opposed to their gross pay, these were not unlawful deductions from wages.
However, that is certainly not how contractors see it! They are inevitably angry when deductions seem to be hidden from them, whether or not this fits within the legal definition of an unlawful deduction.
Custom and practice
Ever since the umbrella industry first came into being it has been custom and practice to state the assignment rate and all subsequent deductions (e.g. employment costs, umbrella margin) so that it is clear how contractors’ gross pay is calculated. Therefore, most umbrella contractors understand “skimming” to be when payments have been deducted from the assignment rate without it being previously declared.
Any deductions made from the assignment rate will inevitably impact on workers’ pay, even if negligible amounts, and when everything else is transparently declared it is easy to see why people are upset about “skimming”.
Where do you draw the line?
If it is acceptable to deduct undeclared small amounts from an assignment rate, does it follow that the umbrella can deduct 50% of the assignment rate without declaring it? Anyone reading this will surely agree that would be wrong!
Once again we have a debate over what is ethical vs legally acceptable. These situations – which seem to happen all too often in the umbrella world – continue to tarnish this sector’s reputation. Quite rightly, contractors are annoyed and we can see why so many are wary about working this way.
Hopefully the sector will react by raising standards and increasing transparency to give everyone the confidence they need.