Sadly, it appears that a well-known umbrella company has filed for liquidation – leaving hundreds of contractors potentially without pay. This is a terrible scenario, and our deepest sympathies are with all the affected employees. We sincerely hope that all outstanding payments are made and no temporary worker finds themselves out of pocket. The following information has been taken from a fantastic blog article published on Contractor UK and written by Adam Home, Managing Director of UK & International Debt Recovery Specialists Safe Collections. We hope you find it helpful.
Unpaid umbrella company employees – what’s happened?
A few months back, Giant Pay, a leading umbrella company, was hit with a serious security threat that temporarily shut down operations. At the time, thousands of Giant Pay employees were left in limbo – not knowing when and if they would be paid. Thankfully, it appears that the situation has resolved itself. On Friday 1st October 2021, Giant Pay confirmed they had made all outstanding payments. We hope Giant Pay are in a strong position now to move forward securely, and all employees are fully paid and able to move forward with confidence. At a similar time, it appeared that another umbrella company – Unified Payroll – had also been struck by security breaches. However, the outcomes doesn’t look as positive.
Having read several tweets online from concerned Unified Payroll employees, it appears the umbrella company is in trouble and liquidators were appointed on the 28th October 2021. This is hugely concerning news, and hundreds of employees could potentially struggle to obtain outstanding payments. We cannot comment on what’s going on because we’re not sure and we don’t want to speculate, but we thought it would be helpful to write an article covering what you can do if you’re unpaid by an umbrella company.
Umbrella companies vs working directly for an end-client/recruitment agency
When you use an umbrella company for your payroll, you become an employee of the umbrella. Therefore, trying to claim money owed to you is different from if you were technically self-employed and need to contact the client/recruitment agency directly. In the article on Contractor UK, Adam Home, Managing Director at Safe Collections, explains what umbrella employees need to know regarding chasing payments from their umbrella employer.
Working through an umbrella company is a very different experience from taking an assignment directly with a client or recruitment agency. Umbrella companies act as payment intermediaries and become the employer of the worker. The umbrella will invoice the end-client or recruitment agency and pay workers with Pay As You Earn (PAYE). Therefore, despite umbrella company employees working for a client – they don’t have any direct relationship with them and will not receive any direct payments or employee benefits.
Before you register with an umbrella company, it’s vitally important you read the Contract of Employment thoroughly. Why? Because different umbrella companies will have different policies about making payments. Adam Home told Contractor UK:
“The good news is, your umbrella company is legally obliged to pay you something regardless of what the end-client does, because the umbrella is bound by employment law. The bad news is that this obligation only extends as far as paying you the statutory minimum wage.
So technically, it’s probably not ever accurate to talk about being ‘unpaid’ through an umbrella company because, to reiterate, even if the end-client doesn’t pay up, you will be paid something. Yet that ‘something’ could be significantly less than the value of the work you did.”
How can unpaid umbrella employees respond, and what are the options?
Disappointingly, Adam confirms in the article on Contractor UK that in this scenario, there is “not very much” that umbrella employees can do. He says:
“You can’t chase the debt from the end-client directly because it’s not legally speaking your debt. It is the umbrella company that has the contractual relationship with the end-client and the umbrella who has the unpaid invoice to chase.
But surely, contractors often ask us, umbrella companies have a vested interest in chasing payments to recover their cut?! And if they are proactive about getting their invoice paid, there’s a good chance that me – the contractor – will eventually get owed money too, right?
You certainly might think so! But in our experience, umbrella companies have limited desire to go ‘hard’ after unpaid invoices. Their key relationships tend to be with recruitment agencies, and their exposure to non-payment is having to pay their employed contractors minimum wage for hours worked – in other words, not very much exposure at all.”
Adam continues:
“If you were absolutely determined to chase the debt yourself as an umbrella contractor, you could look to have it assigned or transferred — from the umbrella, to you. But be aware — this can be difficult and expensive to do properly, because debts have to be assigned in their entirety.
So it may be possible that you need to organise a ‘group action’ with all the other unpaid contractors (and possibly the umbrella company for their cut), to make a case for recovering the full amount. Even if you don’t, the assignment of the debt adds an additional layer of complexity and therefore costs to any potential legal action.”
To see the original article posted on Contractor UK, please click on the following link: Unpaid by an umbrella company? Here’s what contractors should know.
Umbrella company employees should never fear not being paid
We’re all for compliant umbrella companies helping temporary workers get paid. Most umbrellas provide a compliant payroll service that ensures employees pay the correct tax and National Insurance Contributions to HMRC. They also offer additional benefits such as employee rights and insurance cover. However, it’s tough to read that there is a risk that if an umbrella company goes out of business, potentially thousands of employees could go without pay. Not only is this completely unfair, but it’s also deeply concerning to know that affected employees have only a few options to try and regain their hard-earned money.
We believe that legislation needs to be put in place to ensure all umbrella company employees are protected from the risk of loss of earnings due to their umbrella company failing to distribute payments. The government should step in to ensure these workers are paid what they’re owed. After all, umbrella companies should be seen as friends to HMRC because they help ensure temporary workers pay the correct tax and National Insurance.
Top 10 umbrella companies
Are you interested in finding an umbrella company that provides excellent customer services and is committed to compliance? We collated a list of our top 10 umbrella companies, and we think you’ll find it valuable. Every umbrella company in our top 10 is accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport, and some have special offers at the moment. We highly recommend you check them out and see what’s on offer for yourself.
