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Paymaster Limited - employment tribunal view

On 25 September 2013, the Employment Tribunal heard claims from individuals who were engaged with an umbrella provider - Paymaster Limited.

Paymaster Limited went into administration owing pay to individuals it engaged in the form of holiday pay, redundancy pay and breach of contract. However, as Paymaster Limited was in administration, Paymaster took the unusual step of defending this case on the basis that the individuals were not employees or workers of Paymaster Limited.

Despite taking such an unusual tactic, there remained no suggestion that the individuals should bring claims against the recruitment business they used to find work, or the end-user client for whom they were ultimately engaged.

For an umbrella provider to claim that they are not the employer of the individuals it supplies is highly irregular. All reputable umbrella providers will stand by their claims that they are the employer and recognise that this is a risk they bear in return for the assignments provided by recruitment businesses.


The reason for the employment tribunal’s decision that the individuals were not employees or workers centred on the lack of control which Paymaster had over the workers. The Employment Tribunal did not consider any other employment-status indicators (such as substitution or mutuality of obligation as this was not required in this case).

Some of the workers had never spoken to Paymaster and were sent a contract via the post/email. After this, the individuals merely received their pay from Paymaster with no other communications around forthcoming availability, confirmation of the assignments they are engaged on, hours worked or any obligation on the workers to keep in touch with Paymaster.

Sadly in this case, Paymaster was represented by Senior Counsel whereas the individuals were representing themselves, some with just the assistance of an interpreter.  It is therefore unsurprising that the Employment Tribunal took the decision that the individuals had no relationship with Paymaster Limited beyond receiving payments from them.

Thankfully this is only an Employment Tribunal decision and has no binding effect. Nor does it set any legal precedent it merely documents the practices of a defunct umbrella business which operated a high risk pay-day model.

Information for Contractors

This case highlights the importance of contractors working through a compliant umbrella company. Brookson's Development Manager & Head of TAX Matt Fryer Commented "There are many umbrella companies in the market and whilst most are doing things properly there are some providers who do not. There are many compliance badges for umbrella companies, for example FCSA, APSCo affiliate, REC business partner or PCG accredited. Using an umbrella company approved by one of these bodies should give you the confidence to know that you are working through an umbrella company that won’t expose you to risk."

Information for Recruiters

Brookson's Commercial Director Andrew Fahey writes "Our advice to recruiters is to ensure they work with reputable umbrella businesses. The business model used by Paymaster focused on sub-&pound9/hour workers, thus requiring the use of a payday-by payday model.  This model was high risk for the umbrella company and it transpires that this risk was also bourne by the workers who could ill-afford to lose between &pound160 and &pound622 in unpaid holiday pay."

He further added "Creating a list of carefully selected preferred providers which you have vetted and checked to ensure they comply with employment law, recognise their obligations as an employer and actively work to support their employer status will help to steer recruiters away from this situation in the future."






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