Time To Get Rid Of Umbrella Preferred Supplier Lists?

In the wake of recent cyber-attacks, I was asked by a journalist last week what I would recommend to contractors who are considering changing their umbrella, so I found myself thinking about this properly for the first time in ages.  Whereas previously my answer would have been to look for accreditation, it is clear to me that this in itself does not protect a worker against the possibility of a cyber-attack against that umbrella.

I should emphasise that I have every sympathy with the umbrellas that have been attacked, and this blog is in no way a dig at them.

There is speculation that the cyber-attacks are part of a specifically targeted agenda against FCSA, and I know some recruiters are increasingly concerned about this scenario.  In any case, I find it surprising that so many organisations have chosen so far not to comment on what has happened.  Where are they, and what exactly are they doing to protect the best interests of contractors?

Who’s choice is it anyway?

As many of us in the industry know it’s often irrelevant which umbrella a contractor might want to choose as ultimately recruitment agencies call the shots through their preferred supplier lists.  Increasingly I believe that this is fundamentally wrong.  The balance of power is wrong.  It’s wrong that the very people most affected by a poor decision have minimal say in that decision.

In no other industry is it acceptable for people to have no (or minimal) choice about their EMPLOYER.  Yes, employer.  Most decent umbrellas employ contractors meaning that the worker is entitled to all statutory rights and benefits of employment, the same as any employee.  So how is it right to force someone to be employed by a firm not of their choosing?

Decent recruitment firms justify their preferred supplier lists (PSLs) by carrying out due diligence and vetting their chosen umbrellas.  However, as we have seen this does not even guarantee that workers will get paid when they expect to.

What’s really underpinning PSLs?

Many recruitment firms demand that their umbrellas pay fees in order to be included on their PSL.  Sometimes this is properly documented in a commercial, volume based B2B agreement.  However, sometimes financial transactions are not documented and incentives are paid to businesses or individual personnel in more creative ways.  Readers might think that this dubious activity is driven by umbrellas, but in most cases such incentivisation is actually driven by agencies profiting from the opportunity.

My point is that umbrella PSLs will often (but not always) be underpinned by a financial arrangement between the agency and their chosen umbrellas.  So the argument of PSLs being based on a carefully chosen and vetted group does not always stack up, which makes it fundamentally wrong to force workers into a limited choice of umbrella employer!

Going off-PSL

I should state that I totally understand the need for due diligence to ensure that umbrellas are compliant and not some sort of dodgy scheme.  I know that recruitment firms have financial risks that they must manage, however that in itself should not preclude a worker from being able to choose an umbrella outside their PSL.  I am sure many won’t agree with me on that, especially as going off-PSL will create extra work in completing the necessary due diligence.  For me, I would look for three minimum compliance requirements:

  1. that tax and NICs are paid appropriately on workers’ income;
  2. that workers’ personal data is robustly protected;
  3. that workers receive all of their statutory rights – i.e. that they are treated properly.

There is a lot more that can be said about umbrella compliance, but let’s keep it simple if possible!

Time for change?

As I mentioned, I do understand why good recruitment firms have PSLs, my point is simply that there has to be a way for workers to have choice beyond the PSL.  In many cases PSLs themselves are entrenched in behaviours that are not actually in the workers’ best interest, and now is the time for this to change.

It seems wrong to me that a whole industry which is reliant on contractors, indeed has been built around the very notion of supporting them, doesn’t seem to be prioritising them.  Surely now is the time to do so, to admit there are flaws and ditch the PSL?   Who’s with me?

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