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The Government’s Call for Evidence on Umbrella Companies

Umbrella Company

On the 30th of November 2021, the Government published a call for evidence, asking for information about umbrella companies. This document asks for information from all stakeholders, including contractors, on the use of umbrella companies and their place in the temporary labour market. The Government’s stated intention is to improve regulation of umbrella companies, which has been widely welcomed by many in the industry, including Orange Genie. So, what does this mean for umbrella company employees?

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Why are there calls for more regulation of umbrella companies?

As the Government says in the call for evidence document, there are two main risks posed by non-compliant umbrella companies:

  • They may deny workers the employment rights they are due
  • They may facilitate tax avoidance

Both of these activities disadvantage the contractors involved, while enabling the non-compliant umbrella company to operate at a lower cost, which makes life harder for their compliant competitors.

Both may also result in less tax being paid to HMRC, as taxes are “avoided” and workers are often paid less (and therefore taxed less) than they should be, either because they don’t receive the required holiday pay, or by because they’re paid less than the National Minimum Wage.

As a fully compliant umbrella company who are proud of our FCSA accreditation, Orange Genie have been calling for more regulation and for better enforcement of existing laws for over a decade, and we’re cautiously optimistic about where this process might lead.

How umbrella company employees can protect themselves right now

If this consultation does lead to better regulation of umbrella companies, it will require primary legislation and this isn’t going to happen overnight. The risks the consultation mentions; that you may be denied appropriate employment rights and embroiled in a tax avoidance scheme, often with disastrous financial results for you, are very real right now.

The best way to protect yourself is to make sure you’re employed by an established, well-respected umbrella company who are accredited by FCSA. This will ensure your employer knows what they’re doing and cares about doing it properly. Accreditation also demonstrates that your umbrella company has passed an independent assessment against FCSA’s rigorous compliance code.

If you’d like to submit evidence to the Government

The Government have asked for information from all stakeholders, including contractors, and the more accurate information they receive the more opportunity they have to respond in a useful way. If you have the time to contribute, it will involve answering the 16 questions the call for evidence asks of “work-seekers” and emailing your answers to umbrellacompanyevidence@hmtreasury.gov.uk before the closing date of 22 February 2022. You can find a list of the questions for workers-seekers on page 17 of the document.

What happens next?

Even after the call for evidence has completed, it’s unlikely to result in immediate action. A consultation will likely follow, and once that is completed it will take time for legislation to be drafted, and more for it to pass through Parliament. For the foreseeable future things will remain as they are and for umbrella company employees, that means choosing the right umbrella company, and protecting yourself from the dangers of non-compliance.  

If you have any questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.

 

 

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