From the past few weeks, the LITRG (Low Incomes Tax Reform Group) has been unifying different groups including the Trade Union Congress (TUC), the Association of Independent Professionals and the Self-Employed (IPSE), and Matthew Taylor (author of the 2017 Taylor review of modern working practices) to urge the government to bring regulations for the protection of contractors who are working under the umbrella companies
Victoria Todd (Director of LITRG), commented, “Umbrella companies have been in the news a lot recently: there was the furore about an umbrella withholding holiday pay from workers, the loan charge APPG’s report linking umbrella companies to disguised remuneration and now concerns about the use of mini umbrella companies. Added to the negative practices by non-compliant umbrella companies highlighted in our recent report, it is clear what the problems are in this area and that some action is needed.”
Umbrella organisations are organisations that treat contractors as their own employees and manage their pay, taxes and other commitments. These firms are mostly leveraged by low-pay labourers in the work market.
Ms Todd further commented, “Umbrella companies are not always bad. They often perform useful and legitimate functions such as taking on the payroll and HR function of temporary work agencies who can’t or won’t do this in-house and providing an alternative route for freelance contractors who would otherwise have to work through a limited company.
Many umbrella companies also adhere to certain standards and are concerned about the welfare of their workers. However, there is a sizable minority of umbrella companies whose bad practices and non-compliance sadly tarnish the rest of the industry.”
Advice by LITRG
For those contractors who’re worried about how to choose the right umbrella company, the LITRG has delivered the below-mentioned tips:
- Most umbrella companies are non-compliance with tax laws and employee rights as they are not regulated, you should be “wide-awake”.
- Know that a few umbrella companies are boosted by a commission into urging you to sign up to certain umbrella organisations.
- Be sure about what rate your organisation is citing you to work through an umbrella; is it the PAYE rate (the rate they would pay you when you work under them) or is it the 'uplifted rate' (that is, the PAYE rate in addition to all the 'on top' employee costs the umbrella will presently have)? It ought to be the last mentioned (uplifted rate).
- Ensure your umbrella organisation is anything but a hidden remuneration scheme.
- Ensure you don't get involved with dangerous mini umbrella organisations.
- Check how the umbrella organisation will manage your holiday pay.
- Try not to get influenced by the distinctive 'perks' that are being advertised. A portion of these might be worth it.
“The case for some regulation is now overwhelming and we urge the Government to move the issue out of the ‘too hard’ basket, implement previous proposals and consider what other steps are needed to address the many issues in the sector,” concluded Ms Todd in the press release shared by LITRG.
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