A Former Senior Policy Adviser to HM Treasury has written to the Treasury and Department for Business, Energy and Industrial Strategy (BEIS) in order to urge these bodies to regulate the umbrella company industry and push for the protection of workers’ rights.

A draft policy document, submitted to the Treasury, BEIS, has urged the Government to take action on regulating the umbrella market in the absence of any progress on proposed legislation to date.

This document, created by Rebecca Seeley Harris, Chair of the Employment Status Forum and James Poyser, founder of offpayroll.org.uk, calls for the protection of workers within the umbrella company sector.

This includes preventing the practices of withholding holiday pay, incorrect payments of employers’ national insurance contributions, and abuse of the employment allowance tax relief.

This call is not a new one – the Loan Charge All-Party Parliamentary Group previously stated that the current system of voluntary regulation has not prohibited non-compliant operators from operating tax avoidance schemes. It too called for the establishment of statutory regulation and compliance.

Umbrella companies have become a popular vehicle for companies and organisations, managing a temporary workforce to comply firstly with IR35 and now, more recently, with the off-payroll working rules in the private and public sector.

However, this document calls attention to widespread non-compliance of both tax and employment law and the consistent breach of workers’ rights by some umbrella companies.

The recommendations from the draft policy include:

  • Appointing a Director of Labour Market Enforcement as a matter of urgency to provide strategic direction.
  • Identifying whether to form a Single Enforcement Body (SEB) or to expand the remit of the Employment Agency Standards Inspectorate (EAS) to oversee the regulation.
  • Consulting on whether the existing legislation (Conduct of Employment Agencies and Employment Businesses Regulations 2003) is the appropriate legislation to regulate umbrella companies.
  • Clearly establishing what type of regulation is needed in the labour market to ensure compliance of the umbrella companies and other intermediaries.
  • Ensuring that any legislation also protects the rights of the worker.
  • Creating an enforcement body that can assist in recovering holiday pay on behalf of the worker (as HMRC already do for National Minimum Wage).

Rebecca Seeley Harris argued that this would ensure enforcement, uphold workers’ rights and prevent tax evasion:

I drafted the policy to help the government focus on the task in hand and work with industry experts to ensure any legislation provides robust regulation and protection for workers. It is paramount that the regulation of this industry is expedited because of the rise in the use of umbrella companies as a result of both the Coronavirus pandemic and the off-payroll working rules forcing people through non-compliant umbrellas.

The abuses in the labour market supply chain, as a whole, need attention and it may be that the government can look at the bigger picture, including legislation such as IR35 and the off-payroll reforms, because it drives immoral behaviour. The issues concerning employment status in the UK are the driving force behind the use of umbrella companies – it is simply irresponsible to let it continue unregulated. I also believe it’s about time the government responded to the Employment Status consultation that closed in 2018.

The policy has also been shared with the Office of the Director of Labour Market Enforcement and the Loan Charge APPG.