The Trades Union Congress (TUC) has claimed that plans from the government to tackle abuses among umbrella companies do not go far enough. The TUC has raised concerns that proposals may exclude independent contractors who have had to use umbrella companies but aren’t classed as agency workers.
Since the introduction of IR35 legislation for public sector organisations in 2017 and in the private sector last year, umbrella company usage has increased significantly and there are currently thought to be up to 600,000 workers in the UK employed through umbrella companies.
With this has come more intense scrutiny of alleged bad practices among some umbrella companies. Allegations have included some workers saying they were denied holiday pay by their umbrella company, others saying they were not paid at all for work they completed through an umbrella, as well as claims of tax-dodging at some firms.
The TUC has repeated calls for umbrella companies to be banned in order to end these issues and claimed that thousands of workers will continue to be denied basic rights and pay under the government’s proposed reforms.
TUC General Secretary Frances O’Grady said: “It has long been clear that our lack of regulation lets dodgy umbrella companies off the hook – allowing them to act with impunity and treat workers appallingly.”
“But the government’s proposals fall far short of what’s needed. Hundreds of thousands of workers using umbrella arrangements might miss out on protection because they aren’t agency workers. And there aren’t enough inspectors to make sure companies stick to the rules. Tinkering around the edges won’t cut it. It’s time for a ban on umbrella companies.”
IR35 and employment status expert Rebecca Seeley Harris argued that regulations need to be introduced for umbrella companies “sooner rather than later” but added that she did not think they should be banned.
Seeley Harris commented: “In an ideal world, maybe umbrella companies would not be needed but, such is the complexity of hiring someone off-payroll, umbrella companies have found a place in the labour supply chain.”
“Unfortunately, the government has failed to take notice of this market despite being warned of the need to regulate and now bad practices have been allowed to develop.”
