The government has unveiled a new open consultation, and they would like you to help. Whether you work through an umbrella company, possibly as a contractor or freelancer, or you represent a recruitment agency or end-hirer, now is your time to share your thoughts on umbrella companies to help the government potentially pave a more regulated future in the industry. Keep reading, and we’ll summarise what the new ‘Call for Evidence: umbrella company market’ is about, as well as how you can actively help the government move forward. This is an exciting and rare opportunity – so make sure you contribute if you can!
Read the government’s umbrella company consultation document
We recommend you look at the official online document entitled: Call for Evidence: Umbrella company market. The 37 page PDF provides a thorough overview of the government’s understanding of the temporary labour force marketplace and payroll through an umbrella company, and it’s well worth reading.
- Webpage on the government website: Call for Evidence: umbrella company market
- Official document: Call for Evidence: umbrella company market (PDF)
What is the objective of the government’s open consultation investigating umbrella companies?
There is ever-growing pressure on the government to regulate the umbrella company marketplace. Several stakeholders are concerned about the high levels of malpractice in the industry, and there has been a noticeable increase in unethical arrangements targeting vulnerable temporary workers. For example, mini umbrella company fraud has been a recent threat to contractors and freelancers. To put it simply, unethical recruitment professionals were referring candidates to unscrupulous payroll providers to benefit from referral incentives. The workers were put at significant risk.
The umbrella company industry has two standout self-regulating professional bodies – the Freelancer and Contractor Services Association (FCSA) and Professional Passport. Both of these organisations are doing an excellent job to ensure the supply chain of temporary workers is compliant and ethical. However, unethical payroll providers are still targetting workers in the UK despite their greatest efforts, and tax avoidance schemes remain a real threat.
As a result, the government unveiled a new consultation designed to help them better understand the umbrella company payroll industry. The consultation is designed to get valuable feedback from multiple stakeholders within the sector, including temporary workers, staffing businesses and end hirers. Is this the beginning stage of the government regulating the umbrella company sector? It certainly looks this way.
You can make a difference by contributing to the consultation
The purpose of the government’s consultation is to gain insight from stakeholders about all things related to umbrella company payroll and the industry as a whole. If you’re a contractor, freelancer, temporary worker, representative of a staffing agency, or work for an end-hirer – you can help make a difference.
Please keep reading, and we summarise the questions are that asked in the consultation document. The information you need to answer the questions and send your responses to the government are below too. Taking part in the consultation is very easy and won’t take you long.
The more people participating in this consultation, the better the chances of groundbreaking changes in the industry that’ll help protect temporary workers whilst making it increasingly difficult for tax avoidance schemes to flourish.
Contractors, freelancers and agency workers
The following questions are intended for work-seekers who require the services of umbrella companies for payroll purposes. These questions cover working through an umbrella company and Key Information Documents (KID).
- Which sector do you work in? For example, hospitality, retail, or IT.
- How would you describe the main role(s) that you perform?
- How many umbrella companies are you employed by currently?
- How many different assignments have you worked while being employed by the same umbrella company?
- Approximately, what percentage of your annual income comes from roles performed while employed through an umbrella company?
- If you have been working for umbrella companies for more than a year, have you noticed any change in the way umbrella companies market themselves to workers and the benefits they offer? What has changed?
- Do you know which organisation is responsible for your pay, employment rights and employment status?
- Why do you work for/through an umbrella company?
- If you have chosen to work through an umbrella company rather than being paid directly by the employment business, why was this?
- How did you choose which umbrella company to work through?
- Are you issued with terms or a contract by the umbrella company?
- Do you receive a payslip from your umbrella company and, if so, do you understand the payslip?
- Do you have any other feedback on the experience of working through an umbrella company?
- Do you know who is responsible for issuing the Key Information Document to you?
- Are you, or have you been, issued with a Key Information Document when you sign up with an employment business for the first time?
- Are you, or have you been, re-issued with a Key Information Document when the information changes?
- Has receiving a Key Information Document helped you to better understand what you can expect to be paid, at what point and by whom?
The questions above are available on pages 17 and 18 of the official Call for Evidence: Umbrella company market document.
Recruitment agencies and end-hirers
The following questions are targeted at employment businesses and end-hirers of temporary works – where umbrella companies are engaged for payroll purposes.
- Do you represent an employment business, or end-client?
- In which sector does your business operate, or what type of service does it provide?
- Roughly how many people does your organisation employ directly and operate PAYE for overall? [micro (0-9 employees), small (10-49), medium (50-249) and large (250+)]
- If you use umbrella companies, roughly how many people are employed via an umbrella company on behalf of your business each year?
- What factors do you take into account when deciding how to engage staff?
- If you use umbrella companies, why do you work with them?
- If you use umbrella companies, does working with them create any advantages? If so, what are they?
- Does working with umbrella companies create any disadvantages? If so, what are they?
- Have you noticed any change in the way umbrella companies market themselves and the benefits they offer over the last 5 years? What has changed?
- Have you considered working with other intermediaries, such as payroll bureaux?
- If yes, which other intermediaries?
- If yes, why did you decide not to work with them or why did you choose to work with an umbrella company over these other intermediaries?
- The government has heard concerns about supply chains for labour becoming longer. Do you have views on the benefits and drawbacks of longer supply chains and/or why businesses may find that useful?
- Do you encourage or require your work-seekers to work through an umbrella company?
- Why?
- What type of workers?
- Do you operate a preferred supplier list?
- If yes, how many do you use?
- If yes, how do you select these?
- If yes, why do you use a preferred supplier list?
- Do you do carry out due diligence on umbrella companies you work with/on your preferred supplier list? How?
- What proportion of umbrella companies that you work with are accredited by a third-party trade body and which trade body?
- Do you receive all the required information from the umbrella company to accurately complete the Key Information Document?
- Do you independently validate the information received from the umbrella company?
- How?
The questions above are available on pages 12 and 13 of the official Call for Evidence: Umbrella company market document.
General questions
The following questions can be answered by any stakeholder in the umbrella company marketplace. However, it’s a great opportunity for recruitment agencies and hirers to share their thoughts on umbrella companies in the UK. Some of the questions could even be answered by umbrella company representatives who want to share their opinions.
- If you are an employment business or end client which uses umbrella company employees, do you take any steps to prevent umbrella companies which may engage in tax non-compliance from entering your labour supply chains? If so, what?
- How could employment businesses or end clients, who use umbrella companies, do more to ensure tax compliance in their supply chain?
- Do you have experience of umbrella companies engaging in any related schemes or models to those covered above, or any other tax noncompliance not covered in this paper? If so, what are they?
- How could the government support or encourage employment businesses and end clients to do more to ensure tax compliance in their supply chain?
- What further steps, if any, do you think HMRC and government should take to prevent or tackle non-compliant models outlined in this section?
The questions above are available on page 26 of the official Call for Evidence: Umbrella company market document.
How to contribute to the government’s umbrella company consultation
Participating in the government’s umbrella company consultation is easy. You are required to answer the relevant questions honestly (summarised above) and then send them back via email or post.
To email your answered questions, please send them to: umbrellacompanyevidence@hmtreasury.gov.uk.
To post your answered questions, please send them to: Umbrella Company Call for Evidence, Personal Tax Team, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ.
The consultation is due to close at 11:45pm on Tuesday the 22nd February 2022. The findings will be made available in due course.
Top 10 umbrella companies
We’ve collated a list of our top 10 umbrella companies, and we recommend you check it out. Every member of our top 10 is accredited by either the FCSA or Professional Passport. And, some have special offers running at the moment!
