The government has been accused by trade unions of “washing its hands” of thousands of workers who are paid via an umbrella company.
Under an umbrella company workers have to pay both the employer’s and employee’s national insurance contributions in addition to income tax, which can amount to 46 per cent of a worker’s eligible earnings. The worker is also charged an additional sum - often up to £25 a week - for the ‘privilege’ of being paid in this manner.
There has been a huge surge in the number of workers forced to be employed via umbrella companies in recent years. The highest proliferation of workers employed via umbrella companies is in the construction industry but workers in the NHS, local government, road haulage, education and warehouse/logistics are also affected.
In the majority of cases workers are initially engaged via an employment agency but are then told that they will be paid via an umbrella company.
The government’s disinterest was discovered after repeated freedom of information requests which revealed that the Treasury last examined how many people are paid via an umbrella company over three years ago (2015) and the Department of Business, Energy and Industrial Strategy (BEIS) “has not carried out any research into how many people are employed via umbrella companies.”
Umbrella company workers who also pay into an auto-enrolment pension, are further penalised, as they have to pay both the employer’s and the employees’ contributions. When pension contributions rise to eight per cent next year (three per cent employee and five per cent employer), many umbrella company workers will find these unaffordable.
In 2015 the Treasury estimated that 260,000 workers were employed by umbrella companies but even this figure was considered an underestimate at the time, and it it believed the number has increased substantially since then.
Unite assistant general secretary Gail Cartmail said: “The government has clearly washed its hands of workers who are subjected to the misery of being paid via umbrella companies.
“Thousands of workers are being exploited by umbrella companies but the government clearly has no interest in alleviating their misery as they are not even monitoring how many workers are being paid in this way.” she said.
“Workers are being fleeced and deductions are so great that saving for your old age will often be unaffordable as workers can’t make ends meet day to day. This is simply storing up further problems for the future.
“If the government had an ounce of decency it would outlaw the use of umbrella companies and introduce strict rules to ensure workers are paid by standard PAYE.”
A BEIS spokesperson said: “The Government recognises some of the concerns around umbrella companies. This is why we announced our intention to improve transparency for workers and introduce new powers to investigate umbrella companies in our response to the Taylor Review of modern working practices.”
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