Umbrella Worker Wins Unlawful Deductions Case

In a recent tribunal case an umbrella worker successfully claimed unlawful deductions, with the judge deciding that £29,885 was owed to the worker.  The case centres around the documentation the worker received at the start of the assignment, which included:

  • contract of employment from the umbrella company that paid the worker;
  • email from the recruitment agency that found the role for the worker;
  • key information document provided to the worker by the umbrella company.

Lack of clarity
Importantly, the agency email stated the “rate” as being “£800 per day on an umbrella company basis”, which the worker took to mean he was going to earn £800 per day via his umbrella company.  Within the agency’s email there was no definition of what an “umbrella company basis” actually means in practice.

Both the contract of employment and key information document provided by the umbrella company made reference to “deductions as required by law”, and the key information document included a sample calculation which showed the deductions taken from umbrella company income. However, these did not make it clear that the £800 per day “rate” previously confirmed by his agency would not be the worker’s gross pay.

Tribunal findings
The tribunal found the various documents to be ambiguous and that the worker could not have been  reasonably expected to know all the various deductions to come from the “rate” they were quoted.  Therefore, it was judged that the claimant was owed £29,885 in Apprenticeship Levy and Employers NICs taken from their rate.

In our opinion, the most important error is due to the agency stating the “rate” as £800 per day, with no explanation that this is not actually the worker’s gross pay rate.  However, it is the umbrella company that has to repay the worker – because as the entity processing the deductions the umbrella should have been much clearer about what they were doing.

So what?
This case shows us that any workers that have been offered a “rate” without sufficient clarity regarding  what that actually means could have a potential claim against deductions from that rate.  If you need any advice on this, please contact me –

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