You’ve got to feel sorry for umbrella companies. Apart from the odd hiccup (Albany), they provide a stonkingly good service to contractors and have done for the best part of ten years.
So why does it seem like umbrella companies are always under attack?
In many ways, the introduction of the Managed Service Company Legislation (MSC) in April 2007 should have been a catalyst for the exponential growth of the umbrella company marketplace. But all this has really done is line the pockets of law firms and self proclaimed experts who seek to assure recruiters that their preferred umbrella is ‘compliant’ by undertaking a series of expensive audits
Whilst I can appreciate that recruiters want to mitigate their risk of debt transfer under MSC, I still think there should be a greater recognition of the value of umbrella companies and services they provide.
In my experience, if an umbrella company is lucky enough to get onto a recruiter’s preferred suppliers list, they will literally do anything they can to stay on it. This usually means not only making sure they do their own job correctly (i.e paying the contractor on time) but in many cases covering the mistakes of the recruiter’s often woeful payroll department.
Then there’s HMRC and their seemingly relentless attack on umbrella company expenses. Does Hector and his cronies not realise that if umbrella companies didn’t exist, they’d force a couple of hundred thousand ‘blatantly inside ir35 contractors’ into incorporation or worst still offshore?
But all this pales into insignificance when you consider the latest threat to the umbrella company marketplace. I am of course referring to the mother of all sh*t storms – the Agency Workers Directive (AWD).
Where do I start with this one?
After months of consultation and reassurance from the government, it appears that the latest proposals are set to send shockwaves through the temporary recruitment market in the UK.
Limited company contractors are still not sure if they’re inside the scope of not. And with recruiters up in arms about the crippling amount of administration involved, October 2011 is not looking particularly pretty.
What is certain is that umbrella companies are captured by the agency workers regulations. That’s a fact. But just what exactly this means for the industry is still unclear. Some are predicting the rise of the 12 week umbrella while others inside the market are already formulating their master plan (which will almost certainly involve a combination of a 12 week umbrella and own limited company thereafter).
The introduction of the AWD will signal the end of some umbrella providers, yet for others it could well open the floodgates to a hundreds, if not thousands of new contractors.
Umbrella companies have stood the test of time and will be around long after the Agency Workers Directive fully bites. One can only hope that recruiters and HMRC for that matter begin appreciate the good work they do, and the important part they play in our industry.
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