5 things we have learned about the umbrella company marketplace in 2023

5 things we have learned about the umbrella company marketplace in 2023

As 2023 draws to a close, we have been looking back at the umbrella company marketplace to summarise everything we have learned. Please take a look and let us know whether you agree with our summary, and comment with your thoughts below!

1) SafeRec is a game-changer

SafeRec has really hit the umbrella company sector by storm and 2023 was a major year for the AI software provider. If you are not familiar with SAfeRec – we’ve summarised it below, and more information can be found in our article: SafeRec Certification – the new standard shaping the future of compliance in the umbrella company sector.

By choosing a SafeRec Certified Umbrella Company, you can be paid with confidence. Why? Every time you are paid, you’ll be issued with a payslip audit, which reviews your payslip and checks to ensure that all deductions are accounted for, legitimate and correct. You’ll be alerted to any potentially suspicious deductions and if something non-compliant has occurred. Until now, this level of transparency has never been seen in the umbrella marketplace.

Umbrella companies with SafeRec Certification are leading the way with compliance. Not only are they confident they’re fully complying with UK tax law, but they are actively providing proof every time they pay one of their employees. And it’s not just the umbrella employees who can work with total peace of mind. SafeRec also hugely benefits recruitment agencies referring to SafeRec Certified Umbrella Companies because they will be issued with a monthly audit report outlining the results of every audit undertaken for candidates they have referred to the umbrella. Agencies must adhere to important compliance legislation, including the Criminal Finances Act 2017 and ITEPA 2003. Therefore, it’s unsurprising that many agencies already demand that their Preferred Supplier List (PSL) consists exclusively of SafeRec Certified Umbrella Companies. The SafeRec website states:

“SafeRec Certified Umbrella Companies are audited at source in real-time. Workers, agencies and clients who decide to work with the Umbrella Companies below will receive audit reports proving that payrolls have been processed compliantly and ethically and taxes have been paid to HMRC.”

2) The government is working on a compliance strategy

For years and years, there have been calls from stakeholders for the government to regulate the umbrella company sector. In 2021, the government published a call for evidence to seek insight into the way umbrella companies operate in the UK. The results were published in 2023, along with a new government consultation entitled Tackling non-compliance in the umbrella company market (now closed). The new consultation presented three plans for the future protection of the umbrella company marketplace:

  • Mandating due diligence – The end-client or recruitment agency will be responsible for conducting thorough due diligence to ensure they’re operating compliantly within the supply chain.
  • Transfer of debt – Agencies or end-clients could be held accountable if there are non-compliant umbrella companies in the supply chain.
  • Recruitment agencies (or end-clients) are responsible for paying temporary workers correctly (PAYE).

We’ll unlikely see option three as umbrella companies play a valuable role in the supply when – assuming they’re compliant. However, one thing is for sure – changes are expected, and 2024 could be the year where tighter rules (and potentially regulations) are introduced into the sector.

Assuming the new rules are set out to protect contractors and freelancers, we’re all for them and look forward to seeing the subsequent developments.

3) Non-compliance remains a serious threat to the entire supply chain

As we’re regularly reporting, most umbrella companies provide a reliable, compliant and transparent service for contractors and freelancers. However, non-compliant umbrella companies (including tax avoidance arrangements such as disguised remuneration schemes) continue to prey on the vulnerable. The best way to protect yourself against non-compliant payroll providers is to educate yourself about umbrella payroll and how compliant companies will operate. You must only register with an umbrella and sign paperwork (including the Contract of Employment) if you are entirely satisfied with its content.

Dave Chaplin, CEO of ContractorCalculator, recently ran a umbrella company survey to understand temporary workers’ views towards umbrella companies. The results were concerning, as Dave explained in an article on his website:

“The survey results paint a picture of an industry rife with unacceptable non-compliance and contractor exploitation. The umbrella mess has festered for years under a government that does not care about the flexible workforce. Now is the time for reform and accountability. Workers deserve better than more broken promises and inaction from the government. The umbrella industry needs intervention and regulation urgently, else a race to the bottom will ensue.”

The most common “non-compliant” payroll companies will usually offer workers inflated pay retention, as they will not be operating HMRC’s tax system Pay As You Earn (PAYE). Instead, they may offer unusual payment methods such as loans, credits, shares, and more. It’s vital you remember that compliant umbrella companies operate PAYE, and the best way to start your search for a compliant umbrella is to look at those with a professional accreditation from the Freelancer and Contractor Services Association or Professional Passport. Using a SafeRec Certified Umbrella is also highly recommended because you will receive payslip audits every time you are paid – so you can be confident that you have been paid compliantly and by HMRC’s rules and regulations.

4) Even some of the best umbrella companies are still being accused of unscrupulous behavior

Disappointindly, 2023 saw more allegations brought against some of the most respected and established umbrella companies in the UK. For example, earlier in the year, an FCSA accredited umbrella company was accused by an independent body of salary skimming – the practice of unethically retaining more than the umbrella’s margin against the knowledge of employees. While the FCSA’s Independent Arbitration Panel (IAP) concluded that the umbrella in question was not guilty of salary skimming, it still put umbrella companies in the headlines again for unfavourable reasons, and this wasn’t the only occasion such news broke. Another FCSA accredited umbrella company was also accused of generating unethical profit at the expense of their umbrella employees.

Most recently, Contractor Voice shared an article explaining why they believe an “umbrella company, led by an FCSA council member, engineered contracts to pay workers less than what they would receive if they were being paid the NMW”. The article is available here.

5) The umbrellacompanies.org.uk website remains a valuable source of helpful information about umbrella companies!

The umbrellacompanies.org.uk team had a busy 2023 and month on month, we are experience a growth in traffic. We published over 50 articles, improved our umbrella company directly, regularly updated our top 10 umbrella companies and grew our number of partners and contributing umbrella companies. Our primary objective has remained the same since the site was launched in 2010 – to help temporary workers make well-informed decisions about their payroll.

We look forward to continuing to publish helpful content for the UK’s temporary workforce throughout 2024, and if you would like to contribute content or have any suggestions or questions, please email info@umbrellacompanies.org.uk.

Merry Christmas and a Happy New Year

From everyone at umbrellacompanies.org.uk, we wish you a very Merry Christmas and a prosperous 2024. Have a wonderful New Year and we look forward to providing you with helpful umbrella company content throughout 2024 and beyond!

Top 10 umbrella companies

To help make your search for a compliant umbrella company easy, we’ve put together a list of our top 10 umbrella companies. They are all accredited by the FCSA or Professional Passport, and some have special offers that you won’t want to miss!

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