Government consultation : Umbrella market

The Government, led by the HM Treasury, HMRC and Department for Business and Trade, has recently executed a consultation into the Umbrella Market with the aim of tackling non-compliance with Tax and employment regulations in the sector.

The call for information received over 400 responses from industry representatives. The consultation summarised negative feedback from representatives across the following areas:

• No choice but to work via an Umbrella model.
• No choice in which Umbrella company they sign up to is often limited to a client’s Preferred Supply Chain.
• little understanding of how their engagements worked.
• Incorrect pay calculations.
• Administrative Fees too high
• No receipt of employment benefits

Feedback from End Clients, Agencies and Umbrella’s highlighted the positives of the Umbrella Model and why they adopted it. This could be summarised as:

• Ease of administrative burden
• Temporary Workers prefer the Model and offering it makes them more competitive.
• The Umbrella Model makes it easier to fill temporary roles.
• Umbrella companies supported the need for regulation as non-compliant Umbrellas can undercut prices, overall, the consultation reported support for more regulation in the sector.

Since publishing the consultation, the government has updated its guidance to support workers employed via Umbrella companies, but they have expressed the need to and desire to go further to address the remaining challenges in the sector setting our 3 objectives:

• Reducing the number of illegitimate operators in the market.
• Increasing compliance to create a level playing field.
• To protect the Exchequer from further revenue losses relating to Umbrella non-compliance.

Nutral has engaged 129 trade contractors and agencies over the last 10 months to collect and assess information about their temporary labour supply chains and practices in place to mitigate key risks such as exploitation of human/worker rights, tax avoidance and evasion. The key themes from our findings support that of the consultation and add a further explanation for why the Temporary Labour market operates with such levels of non-compliance.

• Most contractors are unaware of Umbrella companies in the supply chain unless they directly contract with them.
• Supply Chain Due Diligence is lacking in the assessment of employment practices and thus inadequate for the market. Due diligence is also infrequent.
• If there is a contract in place this is most often the Umbrella’s standard terms.
• There is often a PSL for Agencies and/or Umbrellas in place but companies regularly operate outside of their PSL.
• Contractors are often unaware of the employment models operating in their sub-supply chain.

Nutral was created to drive a better temporary labour market by creating transparency through technology and driving improvement through services. Our combination of Consultancy and Managed Services Provision is a vehicle for companies to gain confidence in their labour supply chain.