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Criticism of umbrella employers is unfounded says FCSA

As indicated in recent media reports, there is a trend of construction workers transferring to an umbrella from their previous self-employed status.  This is due to recent legislative changes aimed at preventing false self-employment, with agencies now liable for employers’ tax arising from placing workers deemed to be falsely self-employed.  Umbrella firms can be a solution by employing the worker.  Additionally, the worker receives employment rights and statutory benefits, which they would not have whilst self-employed.

Umbrella employers are legally obliged to pay employers national insurance, as well as process the employee deductions.  It is more expensive to pay workers via an employed solution, due to closing the self-employed tax loophole, and project budgets do not always increase accordingly.  This could be the reason behind the case studies, unfortunately resulting in less pay for workers.  

Kermode continued: “The problem is the workers’ expectation to receive a particular pay rate set by their agency.  Agencies should take responsibility for ensuring that the rate they agree with an umbrella is sufficient to maintain hourly rates previously paid to the worker, or to explain any difference to the worker.”  

“As a trade association for the umbrella sector, we are keen to work with all political parties and unions to ensure that good practice is the norm and stamp out bad practice where it exists.  FCSA members are required to adhere to a strict code of conduct, and demonstrate their compliance annually by passing an independent assessment undertaken by regulated accountants and lawyers.”  

When asked what FCSA is doing to dispel the criticisms, Kermode said:

“We have already contacted MPs to make them aware of our role in self-regulating the umbrella sector, and we welcome the opportunity for dialogue.  We must work together to ensure that our sector is not unfairly targeted as a result of misunderstandings, or tarnished by the actions of a minority.”



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