[UK] Legislation to regulate umbrella companies proposed

In the UK, the government has moved forward with moves to regulate umbrella companies by seeking to define them in law and establish an enforcement body, The Register reports.

The proposals are both currently in their early stages as politicians weigh up their options in response to allegations of dubious practices among umbrella companies.

The government reportedly admitted that umbrella companies were essentially unregulated in a consultation paper launched this week.

Umbrella companies take responsibility for paying contractors and casual workers from employers and agencies and, in addition, they are responsible for ensuring workers receive holiday pay, sick pay and pensions in accordance with employment law. 

In 2021, The Register reported that some umbrella companies were failing to pass on holiday pay or siphoning off pay with hidden fees.

The consultation paper - published jointly on June 7 by the Treasury, His Majesty's Revenue & Customs and Department for Business, Energy & Industrial Strategy - said, "Chapter 3 sets out the options the government is considering to address employment rights issues within the umbrella company market such as pay, or holiday pay, being withheld."

The government would, however, need to define umbrella companies before it moves to regulate them. Initially using primary legislation and giving ministers the power to establish regulations with requirements for umbrella companies. It would then need to consult after the definition had become law on the specific requirements to be placed on umbrella companies before implementing them, according to the document.

In its summary of industry consultation [PDF], the government said that 95 per cent of people working for umbrella companies had no other option if they wanted to take on a particular role.

"A number of workers explained that they had previously worked through [personal service companies] but that end clients had moved away from engaging people in this way, citing the reforms to the off-payroll (IR35) working rules, and would only offer roles through umbrella companies," it said.

Julia Kermode - CEO of umbrella company compliance specialist PayePass - told The Register that the government's proposals were "a mixed bag."

"There are some valid proposals, like ensuring proper due diligence is carried out on umbrella companies and holding the supply chain accountable if they fail to do so. But at the same time, the government is putting forward ideas which need real work and threaten how the wider recruitment sector operates," she said.

Source: The Register

(Links and quotes via original reporting)

In the UK, the government has moved forward with moves to regulate umbrella companies by seeking to define them in law and establish an enforcement body, The Register reports.

The proposals are both currently in their early stages as politicians weigh up their options in response to allegations of dubious practices among umbrella companies.

The government reportedly admitted that umbrella companies were essentially unregulated in a consultation paper launched this week.

Umbrella companies take responsibility for paying contractors and casual workers from employers and agencies and, in addition, they are responsible for ensuring workers receive holiday pay, sick pay and pensions in accordance with employment law. 

In 2021, The Register reported that some umbrella companies were failing to pass on holiday pay or siphoning off pay with hidden fees.

The consultation paper - published jointly on June 7 by the Treasury, His Majesty's Revenue & Customs and Department for Business, Energy & Industrial Strategy - said, "Chapter 3 sets out the options the government is considering to address employment rights issues within the umbrella company market such as pay, or holiday pay, being withheld."

The government would, however, need to define umbrella companies before it moves to regulate them. Initially using primary legislation and giving ministers the power to establish regulations with requirements for umbrella companies. It would then need to consult after the definition had become law on the specific requirements to be placed on umbrella companies before implementing them, according to the document.

In its summary of industry consultation [PDF], the government said that 95 per cent of people working for umbrella companies had no other option if they wanted to take on a particular role.

"A number of workers explained that they had previously worked through [personal service companies] but that end clients had moved away from engaging people in this way, citing the reforms to the off-payroll (IR35) working rules, and would only offer roles through umbrella companies," it said.

Julia Kermode - CEO of umbrella company compliance specialist PayePass - told The Register that the government's proposals were "a mixed bag."

"There are some valid proposals, like ensuring proper due diligence is carried out on umbrella companies and holding the supply chain accountable if they fail to do so. But at the same time, the government is putting forward ideas which need real work and threaten how the wider recruitment sector operates," she said.

Source: The Register

(Links and quotes via original reporting)