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Dodgy umbrellas cost workers and HMT approx £4.5bn a year

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    Dodgy umbrellas cost workers and HMT approx £4.5bn a year

    Today in the Grauniad:

    https://www.theguardian.com/business...op-45bn-a-year

    Union and employment experts have called on the government to step up regulation of the temporary labour market, amid concerns abuses by “umbrella” companies may be costing workers and the exchequer as much as £4.5bn a year.

    As many as 600,000 temporary workers in the UK are thought to be employed by umbrella companies, used by recruitment agencies and companies to cut temporary payroll costs.

    In some cases they can provide useful services for contractors, but industry experts and the Trades Union Congress (TUC) fear they are increasingly being used to diminish workers’ rights and misappropriate billions of pounds in unpaid wages and tax fraud.

    “Umbrellas need specific legislation,” said Rebecca Seeley Harris, a tax expert and former Treasury adviser. “It’s rife with problems and I can’t believe the government has sat on its hands and not pursued it.”

    Umbrella companies are coming under increased scrutiny as more people are forced to use them following new, stricter tax rules for contractors. There has also been more recent scrutiny of “mini-umbrella companies”, used to avoid tax potentially worth hundreds of millions of pounds a year. A Guardian investigation last week showed that mini-umbrella schemes appeared to be present in several suppliers to the government’s pandemic test-and-trace system.

    The UK’s former director of labour market enforcement, an official tasked with coordinating the efforts of the various agencies overseeing workers’ rights, in 2018 cited estimates of a £4.5bn cost, including £1bn from unpaid wages, and £1bn from frauds including mini-umbrella companies.

    The other crucial issue is holiday pay, a legal requirement. Umbrella companies have been estimated to withhold holiday pay worth £2.5bn a year. Holiday pay is forfeited if workers do not actively claim it before the end of a tax year – meaning unscrupulous umbrellas can pocket it rather than paying it to workers. There is no organisation in charge of recovering unpaid holiday pay for workers.

    Seeley Harris, who chairs the Employment Status Forum, has written to ministers Jesse Norman and Paul Scully calling for urgent action, including the immediate appointment of a new director of labour market enforcement, a role that has been empty since the start of the year.

    She wrote that the government must push ahead if it plans to create a single enforcement body for employment law, as promised in the 2019 Conservative manifesto.

    Frances O’Grady, the TUC’s general secretary, said: “Everyone deserves decent work. But a lack of regulation is allowing dodgy umbrella companies to operate with impunity. The victims are often low-paid key workers, denied their basic rights like holiday pay and minimum wage.

    “Ministers must consider whether umbrella companies should be allowed at all. Employers shouldn’t be able to farm out their duties to a long line of intermediaries – washing their hands of any responsibility.”

    The TUC has also raised concerns about declining enforcement of labour market laws. Inspections of employers by HM Revenue and Customs, responsible for policing minimum wage laws, and the Employment Agency Standards Inspectorate (EASI) fell by 20% and 50%, respectively, during 2020 compared with 2019.

    The TUC said that basic workers’ rights are “illusory” if not backed up by proper enforcement, and that more resources are needed. For instance, 40,000 employment agencies are covered by only 19 EASI inspectors.

    Andy Chamberlain, director of policy at IPSE, the Association of Independent Professionals and the Self-Employed, said regulation of umbrella companies was “long overdue” and added that the “recent controversy over mini-umbrellas is the tip of the iceberg”.

    He added that government action was urgent because the new rules for contractors had “pushed yet more individuals into the wild west of the umbrella market”.

    A UK government spokesperson said: “Protecting and enhancing workers’ rights through robust regulation – including for those employed by umbrella companies – is a priority for this government.

    “We have already introduced requirements to improve the information provided to new agency workers about their contractual terms and pay rates, and have committed to establishing a single enforcement body to further protect vulnerable workers.”

    #2
    interesting.... "the wild west of the umbrella market"

    Regulation on its way ....

    Comment


      #3
      Originally posted by saptastic View Post
      interesting.... "the wild west of the umbrella market"

      Regulation on its way ....
      Not at the moment it's not - the Treasury are using the need to recover from Covid to justify delaying it, for a unified employment and tax law isn't something HMRC can or will accept.
      merely at clientco for the entertainment

      Comment


        #4
        Originally posted by eek View Post

        Not at the moment it's not - the Treasury are using the need to recover from Covid to justify delaying it, for a unified employment and tax law isn't something HMRC can or will accept.
        Which begs the question when the expletive deleted did HMRC become a legislative body?? They are an agency of the Treasury not a branch of government.
        Blog? What blog...?

        Comment


          #5
          Originally posted by malvolio View Post
          Which begs the question when the expletive deleted did HMRC become a legislative body?? They are an agency of the Treasury not a branch of government.
          It's the HMRC tail wagging the HMT/HMG dog...

          Comment


            #6
            Originally posted by ladymuck View Post

            It's the HMRC tail wagging the HMT/HMG dog...
            Yes you can just replace HMRC with the Treasury. The simple fact is that another that ties employment law and employment tax law together in a way that costs HMRC / HMT tax revenue at the moment isn't going to wash.

            And that is one of the pains about all the MUC issues - HMRC don't rush to do things as they never need to - they can always hit the other people in the chain (i.e. the poor saps who worked through the dodgy umbrella and the agencies who sent the workers to them).
            merely at clientco for the entertainment

            Comment


              #7
              Separately the Holiday pay isn't actually the big profit centre the umbrellas think it is.

              There have been a number of employment tribunal decisions regarding holiday pay over the years - of which the most recent one (from March 2021) is rather important and although this says No Backdated pay that's because of a technicality not anything worse.

              No backdated holiday pay for former Pimlico Plumber worker | Balfour + Manson (balfour-manson.co.uk)
              Last edited by eek; 19 May 2021, 16:48.
              merely at clientco for the entertainment

              Comment


                #8
                The policy document has pushed for confirmation of which body could be used to front the regulation, not as straight forward as it sounds, as EAS, BEIS, HMRC currently all cover different areas which touch the brollies, but lets hope it will push things forward. Rebecca has quite a backing so it will be a good and needed start to try and regulate this minefield

                Comment


                  #9
                  Originally posted by lucyclarityumbrella View Post
                  The policy document has pushed for confirmation of which body could be used to front the regulation, not as straight forward as it sounds, as EAS, BEIS, HMRC currently all cover different areas which touch the brollies, but lets hope it will push things forward. Rebecca has quite a backing so it will be a good and needed start to try and regulate this minefield
                  And then you go to thr EAS website (who deal with Employment Agencies) and you discover that in all the work they do only 3 people are currently banned by them from running an Employment Agency

                  People prohibited from running an employment agency or business - GOV.UK (www.gov.uk) List has 4 but one of those is now time served so he could start up again.
                  merely at clientco for the entertainment

                  Comment


                    #10
                    That's why its not so clear cut - if you want a department that could then look to recover holiday pay, then it would be applicable to HMRC who already cover minimum wage payments. Lots of areas to cover!

                    Comment

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