Knowledge is Power

The 400% increase in umbrella working means that compliance is more important than ever

The umbrella industry is famously unregulated, which leaves contractors unprotected and vulnerable to scammers and crooks. But while many of us got our hopes up with the government consultation into umbrella working, which concluded in February 2022, the situation remains the same, except with one small difference… The rate at which the industry has grown.

In this article, we’ll look at the current state of the industry, and explain how compliant umbrella companies provide a useful service as well as protection from unlawful working practices.

Deafening silence as UK government continues to fail umbrella workers

Umbrella companies have been supporting contractors in the UK ever since the original IR35 legislation in 1999, which was designed to protect tax income from disguised employment. Umbrella companies meant that contractors, who would previously have been considered inside IR35, to save some money as employees of an umbrella company, rather than directors of their own limited company.

Over the years, there have been several changes in legislation, including the Agency Worker Regulations in 2011, the Offshore Employment Intermediaries Legislation and Onshore Intermediaries Legislation, both in 2014, GDPR in 2018 and IR35 reforms in 2021, all of which have had an impact on the way contractors and agency workers operate. Yet despite all these legislative changes, the umbrella company industry continued to be unregulated.

November 2021 - Government consultation began 

After much criticism, and following Matthew Taylor’s 2017 “Good Work Plan”, which had been commissioned by the government themselves, a consultation into umbrella working began in November 2021. This sparked much excitement in the industry, as it was presumed to be a precursor for umbrella sector regulation and the highly anticipated Single Enforcement Body (which was expected to be the regulatory body responsible for cleaning up the umbrella industry).

The consultation concluded in February 2022, and the industry has been waiting for the government’s response, which has never arrived.

Huge growth in umbrella sector

The need for regulation is getting desperate now because the industry is growing so rapidly. According to official data, there were 100,000 umbrella workers in 2007/2008, with numbers growing to over half a million by 2020/2021, representing a 400% increase. And as the way we work continues to evolve, industry insiders predict that umbrella working will continue to gain popularity, as short-term contracts, flexible recruitment, and more adaptable approaches to workforce management become even more commonplace.

“Government has a duty of care” - Kermode

Julia Kermode is the founder of independent work champions iWork. iWork provides information that empowers temps, freelancers, self-employed and gig workers, and as an organisation have frequently encountered people who have had their lives impacted by inadvertently getting involved in tax avoidance through an umbrella recommended by their agency.

Pointing out that the government clearly knows that there is a problem, as evidenced by their own figures, Julia goes on to slam the government’s lack of action, “surely by continuing to do nothing (despite knowing the impact of doing nothing) they are being negligent?” she says.

How to protect yourself

While the umbrella industry is unregulated, compliant umbrella companies deliver a valuable service to contractors, and the right umbrella can protect you from the dangers of tax avoidance as well as provide expert advice on how to meet your obligations.

Working with a compliant brolly will ensure that your tax is paid, and other responsibilities are met, which leaves you free to focus on your work. And with many agencies now insisting that contractors work with an umbrella as part of their policy, finding a compliant umbrella company that you can trust to look after you for the long term is crucial.

Make sure you only work with FCSA registered umbrellas. Other accreditations to look for include umbrellas who are partners of jobsaware and iWork. These bodies demand the highest standards in the industry and working with an accredited umbrella can provide protection and peace of mind that the company has been checked for compliance. 

Ship Shape are fully compliant employment and payroll specialists with nearly 20 years of experience in offering umbrella, CIS, Self-employed, PEO and Bureau services to contractors and agencies. 

If you’d like to find out more about how we can help, don’t hesitate to get in touch.
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