Call to prioritise funding in Spending Review for umbrella regulation
James Poyser and Rebecca Seeley Harris have made a submission to the autumn Spending Review to ensure that the Single Enforcement Body (SEB), which will be responsible for umbrella company regulation, gets funding.
In June, the Department for Business, Energy and Industrial Strategy (BEIS) announced the creation of a new Single Enforcement Body (SEB) to protect workers’ rights and clamp down on workplace abuse – including umbrella company workers.
In their submission, James and Rebecca call on the government to:
Firstly:
- sufficiently fund the Single Enforcement Body (SEB)
If sufficient funding is not available for the SEB, they ask the government to:
- consider increasing funding for the Employment Agencies Standards Inspectorate (EASI)
- include the regulation of umbrella companies and measures to protect umbrella company workers either within the existing legislation i.e. the Conduct of Employment Agencies and Employment Businesses Regulations 2003; OR
- introduce new legislation, as set out in their draft Umbrella Regulation Policy document submitted to FST and BEIS earlier this year.
Regardless of the above, they call for the government to ensure funding for the still vacant post of the Director of Labour Market Enforcement. Failure to fill this post will undermine the Government’s ability to be effective on this issue of umbrella regulation.
Open letter to BEIS
They have also written an open letter to Paul Scully MP (BEIS), accompanying the submission, which reiterates the importance of sufficient funding to protect umbrella workers.
The government has committed to setting up a single enforcement body, which is a key starting point. BUT they need to commit the cash to make it happen otherwise it’s just rhetoric. We’ve written this letter to remind the government of the importance of this body, and to ensure it gets budgeted for in the coming weeks.
James Poyser, inniAccounts CEO and founder of OffPayroll.org.uk
“It has become abundantly clear since we met your team to discuss our proposed policy that regulation and enforcement are the best and only ways to protect workers’ rights, but also thwart unethical practices and overcome the widespread tax evasion in the umbrella market.
“We have made it clear in our submission, copied below, that if sufficient funds aren’t allocated to the SEB, then existing bodies will need an urgent increase in funding to protect umbrella workers. This should include funding to the Employment Agencies Standards Inspectorate. We trust you will support this motion.”
“It is vitally important, now more than ever, that the umbrella company industry should be regulated:
- In May 2021, the extent of fraud related to so called ‘mini-umbrellas’ was exposed. The former Director of Labour Market Enforcement estimated the cost to be in the region of £1bn per year.
- The holiday-pay scandal during the pandemic underlined the extent to which umbrella company workers were being duped out of money that was rightfully theirs. Even before 2020, the value of unpaid holiday pay to umbrella company workers was at least £1.8bn equating to £300 million in lost income tax. It now stands at £2.5bn and, in total, misappropriated funds from umbrella ‘skims and scams’ are estimated to cost £4.5bn.
- On 22 September 2021, it was reported that Giant, an umbrella company with a turnover of £368m, had been hacked and as a result could not access its systems or pay its workers, leaving thousands unable to meet their financial obligations.
- Also last week, it was reported that Unified Payroll could not pay its workers because of ‘security issues’ with its bank account, something that Unified called “an unprecedented and very unfortunate situation”.
- On 28th September, the FCSA warned that some member firms appeared to be the victim of cloning. It is assumed that this cloning activity has a financial motive and is, therefore, linked to fraud.
- We are now seeing reports that HGV drivers are reluctant to continue as they are pushed into ‘inside IR35’ contracts. We anticipate and are concerned that care assistants, nurses, locum doctors will be the next cohort of workers to walk out over unfair conditions of employment.
“We are sure you will agree that these are unprecedented times, and it calls for unprecedented measures. IR35 has created the growth of umbrellas leading to an unfair and unethical market. What’s more, it is astounding that companies handling millions of pounds of other people’s pay, remain unregulated. It is an unsustainable situation for workers, employers and taxpayers.
“It’s clear from the figures stated above that non-compliant umbrellas have a competitive advantage over honest ones. Regulation is desperately needed in order to level the playing field. And, as our policy sets out, regulation must also be introduced to prevent abuses in the supply chain, between the agency and the umbrella company.
“We remain steadfast to our recommendations that regulation of the market is an essential step to prevent further abuse of workers’ rights and tax evasion. However, in light of this week’s events, we have updated the policy to include fraud and security – a copy of which has been submitted to the Spending Review.
“We trust you will be representing this case with the Spending Review. It’s time to act and stamp out mini umbrellas, unethical business practices and tax evasion by umbrellas, and create a system that positions the UK as a leader in global labour markets.”
Yours sincerely,
Rebecca Seeley Harris, Re Legal Consulting and chair Employment Status Forum
James Poyser, CEO inniAccounts and founder of Offpayroll.org.uk
Government Spending Reviews take place every three years. They set out the expenditure limits and resources that will be assigned to each ministerial department during the next three years. The next review coincides with the Autumn Budget at the end of October.