The government has published a call for evidence on the umbrella company market.
Umbrellas – what are they?
Umbrella companies play a role in the labour market by facilitating the engagement of temporary workers. Umbrella companies employ individuals on behalf of clients and employment businesses. They do not source work for the employee, which is typically done by an employment business further up the labour supply chain. Although workers are employed by the umbrella company, the worker does not provide services to the umbrella company itself. Rather, the workers provide their labour to clients, typically on a short-term basis.
Umbrella companies are responsible for paying salary, deducting tax, National Insurance contributions (NICs) and managing employment rights such as holiday pay, statutory sick pay and workplace pension auto-enrolment.
What’s the concern?
Whilst the country wants to encourage a dynamic and flexible labour market operating innovative business models and new ways of working that support these aims, it is still important that workers are protected from exploitation and that these new models of working do not lead to unfair outcomes for workers or the ability for some unscrupulous participants to abuse the system.
The government is aware of concerns regarding non-compliance with employment law, including umbrella companies failing to provide employment rights such as holiday pay, and poor market practices, for example, a lack of transparency over pay rates, fees and charges.
Compliant umbrella companies ensure that the correct tax and NICs are paid. There are others which are not compliant.
The call for evidence
The call for evidence invites views from stakeholders on the role that umbrella companies play in the labour market, and how they interact with the tax and employment rights systems.
It sets out the concerns that have been raised by some stakeholders, as well as government action already taken to tackle tax non-compliance and improve protection for workers.
The government would like to hear from organisations and individuals to better understand this sector and how it is continuing to evolve. Including the benefits of the umbrella company model in the flexible labour market and the motivation for using them.
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