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Backoffice MD asks is this the end of umbrella solutions?

Roger Mason, the managing director of Backoffice, the Birmingham based payroll provider thinks that the days of the umbrella have finally come to an end.

In November 2012 he placed Paymaster Ltd, another of his companies into a creditors voluntary administration and they were the first to withdraw their umbrella product for lower paid workers from the market, that product had often been referred to as the 'Pay Day by Pay Day' model.

He says that the decision was not very popular at the time, but feels the company had very good reasons behind  it. Mason feel that 'they have been vindicated in their decision in that most, if not all low paid models have now been withdrawn.' Since then Backoffice continued to offer an umbrella solution for workers earning more than &pound9.00 per hour.

Following an employment tribunal which took place in Birmingham on September 25th 2013, which was essentially a number of Paymaster workers claiming unpaid holiday and other employment issues, it was the judgment of Judge Perry that "the claimants were neither employees nor workers within the meaning of the Employment Rights Act 1996 nor Working Time Regulations 1998" and that Paymaster Ltd did not have control of the workers, an essential element in his view of an employee/employer relationship. A copy of the Judgment, case number 1301594/2013 can be viewed on the Backoffice website, www.backoffice.com.

Therefore, based upon what is now believed to be a ground-breaking ruling they will no longer be providing any umbrella solutions as they feel this judgment means the end of the umbrella model, as they have known it.

Roger says that “regrettably we seem to be at the forefront again and will no doubt be unpopular for a second time by removing ourselves from controversy” but are keen to give our clients the latest and best possible indication of changing legislation or current legislation being more clearly defined that might affect our clients business.”

“There is no doubt that other Umbrella payroll providers will be slow to follow our lead, there will be those that will insist they are compliant and already have HMRC agreement of their compliance and it is not for us to doubt their products, their integrity or the way in which they satisfy HMRC that they are “OK”, even though as a result of this judgement we are saying that we can no longer continue, we would say, take very careful and specific, independent legal advice yourself and if at all possible, have that advice underwritten.”

He continued, “Do not rely on the advice being given by Backoffice or any of our contemporaries in the market this is potentially an alarming decision for Umbrella providers and a very unhelpful ruling. You must decide for yourself.”

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